Experiments in State Control at the War Office and the Ministry of Food

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Publications of the
Carnegie Endowment for International Peace
Division of Economics and History

ECONOMIC AND SOCIAL HISTORY
OF THE WORLD WAR

British Serzes

JAMES Ts; SHOTLWELL, Pub LED:

GENERAL EDITOR
With the Collaboration of the

BRITISH EDITORIAL BOARD

Sir William H. Beveridge, K.C.B., M.A., B.C.L. (Chairman)
Professor H. W. C. Davis, C.B.E., M.A.

Sir Edward C. K. Gonner, K.B.E., M.A., Litt.D.

F, W. Hirst, Esq.

Thomas Jones, M.A., LL.D.

J. M. Keynes, C.B., M.A.

Professor W. R. Scott, D.Phil., Litt.D., LL.D., F.B.A.
Professor J. T. Shotwell (ex officio)

For List of other Editors and the plan of the Series see end
of this volume

EXPERIMENTS IN __

STATE CONTROL
At the War Office and the
Ministry of Food

BY

Ee Vier Sa LLOYD

FORMERLY OF THE RAW MATERIALS SECTION, WAR OFFICE,
ASSISTANT SECRETARY, MINISTRY OF FOOD

OXFORD: AT THE CLARENDON PRESS
London, Edinburgh, New York, Toronto, Melbourne, Cape Town, Bombay
HUMPHREY MILFORD
1924

haiti x
j

7!

PRINTED IN ENGLAND
AT THE OXFORD UNIVERSITY PRESS

ATLTRGHENY COLLEGE LIBRARY

EDITOR’S PREFACE

In the autumn of 1914 when the scientific study of the effects
of war upon modern life passed suddenly from theory to history,
the Division of Economics and History of the Carnegie Endow-
ment for International Peace proposed to adjust the programme
of its researches to the new and altered problems which the War
presented. The existing programme, which had been prepared
as the result of a conference of economists held at Berne in
1911, and which dealt with the facts then at hand, had just
begun to show the quality of its contributions; but for many
reasons it could no longer be followed out. A plan was therefore
drawn up at the request of the Director of the Division, in which
it was proposed by means of an historical survey, to attempt
to measure the economic cost of the War and the displacement
which it was causing in the processes of civilization. Such an
‘Economic and Social History of the World War’, it was felt,
if undertaken by men of judicial temper and adequate training,
might ultimately, by reason of its scientific obligations to truth,
furnish data for the forming of sound public opinion, and thus
contribute fundamentally toward the aims of an institution
dedicated to the cause of international peace.

The need for such an analysis, conceived and executed in the
spirit of historical research, was increasingly obvious as the War
developed, releasing complex forces of national life not only for
the vast process of destruction but also for the stimulation of new
capacities for production. This new economic activity, which
under normal conditions of peace might have been a gain to
society, and the surprising capacity exhibited by the belligerent
nations for enduring long and increasing !oss—often while pre-
senting the outward semblance of new prosperity—made necessary
a reconsideration of the whole field of war economics. A double
obligation was therefore placed upon the Division of Economics
and History. It was obliged to concentrate its work upon the

2S) Ovens

vi EDITOR’S PREFACE

problem thus presented, and to study it as a whole; in other
words, to apply to it the tests and disciplines of history. Just
as the War itself was a single event, though penetrating by seem-
ingly unconnected ways to the remotest parts of the world, so
the analysis of it must be developed according to a plan at once
all embracing and yet adjustable to the practical limits of the
available data.

During the actual progress of the War, however, the execution
of this plan for a scientific and objective study of war economics
proved impossible in any large and authoritative way. Incidental
studies and surveys of portions of the field could be made and were
made under the direction of the Division, but it was impossible to
undertake a general history for obvious reasons. In the first place,
an authoritative statement of the resources of belligerents bore
directly on the conduct of armies in the field. The result was to
remove as far as possible from scrutiny those data of the economic
life of the countries at war which would ordinarily, in time of
peace, be readily available for investigation. In addition to this
difficulty of consulting documents, collaborators competent to
deal with them were for the most part called into national service
in the belligerent countries and so were unavailable for research.
The plan for a war history was therefore postponed until condi-
tions should arise which would make possible not only access to
essential documents but also the co-operation of economists,
historians, and men of affairs in the nations chiefly concerned,
whose joint work would not be misunderstood either in purpose
or in content.

Upon the termination of the War the Endowment once
more took up the original plan, and it was found with but
slight modification to be applicable to the situation. Work was
begun in the summer and autumn of 1919. In the first place
a final conference of the Advisory Board of Economists of the
Division of Economics and History was held in Paris, which
limited itself to planning a series of short preliminary surveys of
special fields. Since, however, the purely. preliminary character
of such studies was further emphasized by the fact that they were

EDITOR’S PREFACE Vii

directed more especially towards those problems which were then
fronting Europe as questions of urgency, it was considered best
not to treat them as part of the general survey but rather as of
contemporary value in the period of war settlement. It was clear
that not only could no general programme be laid down a priori
by this conference as a whole, but that a new and more highly
specialized research organization than that already existing would
be needed to undertake the Economic and Social History of the
War, one based more upon national grounds in the first instance
and less upon purely international co-operation. Until the facts
of national history could be ascertained, it would be impossible
to proceed with comparative analysis ; and the different national
histories were themselves of almost baffling intricacy and variety.
Consequently the former European Committee of Research was
dissolved, and in its place it was decided to erect an Editorial
Board in each of the larger countries and to nominate special
editors in the smaller ones, who should concentrate, for the
present at least, upon their own economic and social war history.
The nomination of these boards by the General Editor was the
first step taken in every country where the work has begun. And
if any justification was needed for the plan of the Endowment,
it at once may be found in the lists of those, distinguished in
scholarship or in public affairs, who have accepted the responsi-
bility of editorship. This responsibility is by no means light,
involving, as it does, the adaptation of the general editorial plan
to the varying demands of national circumstances or methods of
-work ; and the measure of success attained is due to the generous
and earnest co-operation of those in charge in each country.
Once the editorial organization was established there could
be little doubt as to the first step which should be taken in each
instance toward the actual preparation of the history. Without
documents there can be no history. The essential records of the
War, local as well as central, have therefore to be preserved and to
be made available for research in so far as is compatible with public
interest. But this archival task is a very great one, belonging of
right to the governments and other owners of historical sources

vill EDITOR’S PREFACE

and not to the historian or economist who proposes to use them.
It is an obligation of ownership; for all such documents are public
trust. The collaborators on this section of the war history, there-
fore, working within their own field as researchers, could only
survey the situation as they found it and report their findings in
the form of guides or manuals; and perhaps, by stimulating
a comparison of methods, help to further the adoption of those
found to be most practical. In every country, therefore, this was
the point of departure for actual work ; although special mono-
graphs have not been written in every instance.

This first stage of the work upon the war history, dealing with
little more than the externals of archives, seemed for a while to
exhaust the possibilities of research. And had the plan of the
history been limited to research based upon official documents,
little more could have been done, for once documents have been
labelled ‘secret’ few government officials can be found with
sufficient courage or initiative to break open the seal. Thus vast
masses of source material essential for the historian were effec-
tively placed beyond his reach, although much of it was quite
harmless from any point of view. While war conditions thus
continued to hamper research, and were likely to de so for many
years to come, some alternative had to be found.

Fortunately such an alternative was at hand in the narrative,
amply supported by documentary evidence, of those who had
played some part in the conduct of affairs during the war, or who,
as close observers in privileged positions, were able to record
from first- or at least second-hand knowledge the economic history
of different phases of the Great War, and of its effect upon society.
Thus a series of monographs was planned consisting for the most
part of unofficial yet authoritative statements, descriptive or
historical, which may best be described as about half-way between
memoirs and blue-books. These monographs make up the main
body of the work assigned so far. They are not limited to con-
temporary, war-time studies ; for the economic history of the war
must deal with a longer period than that of the actual fighting.
It must cover the years of ‘ deflation ’ as well, at least sufficiently

j

EDITOR’S PREFACE 1x

to secure some fairer measure of the economic displacement than
is possible in purely contemporary judgements.

With this phase of the work, the editorial problems assumed
a new aspect. The series of monographs had to be planned
primarily with regard to the availability of contributors, rather
than of source material as in the case of most histories; for the
contributors themselves controlled the sources. This in turn
involved a new attitude towards those two ideals which historians
have sought to emphasize, consistency and objectivity. In order
to bring out the chief contribution of each writer it was impossible
to keep within narrowly logical outlines ; facts would have to be
repeated in different settings and seen from different angles, and
sections included which do not lie within the strict limits of history ;
and absolute objectivity could not be obtained inevery part. Under
the stress of controversy or apology, partial views would here and
there find their expression. But these views are in some instances
an intrinsic part of the history itself, contemporary measurements
of facts as significant as the facts with which they deal. Moreover,
the work as a whole is planned to furnish its own corrective;
and where it does not, others will.

In addition to this monographic treatment of source material,
a number of studies by specialists,is already in preparation,
dealing with technical or limited subjects, historical or statistical.
These monographs also partake to some extent of the nature of
first-hand material, registering as they do the data of history
close enough to the source to permit verification in ways impossible
later. But they also belong to that constructive process by which
history passes from analysis to synthesis. The process is a long
and difficult one, however, and work upon it has only just begun.
To quote an apt characterization, in the first stages of a history
like this one is only ‘ picking cotton’. The tangled threads of
events have still to be woven into the pattern of history ; and for
this creative and constructive work different plans and organiza-
tions may be needed.

In a work which is the product of so complex and varied
co-operation as this, it is impossible to indicate in any but

x EDITOR’S PREFACE

a most general way the apportionment of responsibility of editors
and authors for the contents of the different monographs. For
the plan of the History as a whole and its effective execution
the General Editor is responsible; but the arrangement of the
detailed programmes of study has been largely the work of the
different Editorial Boards and divisional Editors, who have also read
the manuscripts prepared under their direction. The acceptance
of a monograph in this series, however, does not commit the editors
to the opinions or conclusions of the authors. Like other editors,
they are asked to vouch for the scientific merit, the appropriate-
ness and usefulness of the volumes admitted to the series; but
the authors are naturally free to make their individual contribu-
tions in their own way. In like manner the publication of the
monographs does not commit the Endowment to agreement
with any specific conclusions which may be expressed therein.
The responsibility of the Endowment is to History itselfi—an
obligation not to avoid but to secure and preserve variant narra-
tives and points of view, in so far as they are essential for the
understanding of the War as a whole.

ned eS

PREFACE

Ir is difficult to write history, and perhaps more particularly
economic history, without allowing a certain bias to creep in.
With regard to events so recent and so controversial as the
operation of State control during the war, most people would
confess to some degree of prejudice. If this book is to be read
with an open mind, therefore, it may be well for the author to
confess his bias at the outset.

First, I write as a loyal British subject, who was engaged in
war service. The amount of prejudice imported by this fact is
incalculable, but inevitable.

Secondly, I believed and still believe that to wage war effectively
involves replacing private enterprise by collective organization.
In this respect I sympathize with those who hold that the
necessity for war-time control of life, liberty, and property is an
additional reason for abolishing war. Another great war will
plunge the world into a sort of military communism, in comparison
with which the control exercised during the recent war will seem
an Arcadian revel. Personal freedom and private property are
condemned by the exigencies of modern war; and I confess to
a prejudice in favour of both.

Thirdly, I am disinclined to admit that all the measures of
industrial and commercial organization adopted during the war,
which are commonly lumped together under the term State
control, were merely necessary evils to be got rid of as soon as
possible and never to be thought about again. A considerable
extension of co-operative and collective enterprise seems to me
probable and desirable in times of peace ; and I believe that there
is something to be learnt from the experiments in State control
during the war which may be of positive value in the difficult
times ahead.

In a word, this book is not designed to teach Governments
how to wage war ; nor is it intended as a text-book on the abolition
of private enterprise. It is meant as a contribution to the economic
history of the war—as a record of facts and impressions drawn

xi PREFACE

from a small but important field of war-time administration. And
so far as it is coloured by opinions, they arise out of a belief that
even war has its lessons—lessons of social idealism and practical
co-operation, which were never so badly needed as in the period
of recovery from war.

While, therefore, the author’s limited outlook restricts him
primarily to matters of administrative policy and technique, an
endeavour has been made to contribute to the discussion of the
wider problem with which this series is concerned: namely,
the psychological and economic reactions of the war upon the
normal processes of civilized life. When the time comes for
computing the total net cost of the war and its after-effects,
what little there is to be set down on the credit side will need
to be sifted with microscopic care from the evil consequences that
leap at once to the eye; and among those changes and develop-
ments that may appear to some to contain the germs of a better
order of society a place may perhaps be found for some features,
at any rate, of the experiments described in this volume.

The aim of the book is to trace the evolution of war-time
controls in certain sections of the War Office and the Ministry of
Food. No attempt has been made to give a complete historical
record of these controls (some of which, such as wool and food,
are more fully dealt with in other monographs in the Series),
but rather to present a comparative picture having a fairly wide
range.

The first chapter contains a brief sketch of army supply in the
past as a background to the work of the Army Contracts Depart-
ment during the war. Two chapters are devoted to the early days
at the War Office, before the Ministry of Munitions was established.
The rest of the book is concerned with trades and industries
falling outside the sphere of munitions, principally with textiles,
leather, and certain foods.

The fourth chapter describes the early application of re-
quisitioning and costing to the jute industry. The plan of fixing
‘ conversion costs’ throughout the various stages of manufacture
was first conceived in March 1915, in connexion with the supply
of jute goods. The circumstances which led up to and accompanied

PREFACE xii

this first experiment are therefore set out in some detail. Attention
is then turned to the problem, that at one time seemed almost
insoluble, of finding, or rather inventing, a satisfactory legal
foundation for the measures of control on which the War Office
had embarked. This chapter explains the genesis of certain
Regulations and Amendments issued under the Defence of the
Realm Act, giving power to requisition output, license or prohibit
dealings, fix prices and examine costs.

The next stage is represented by State purchase of raw
materials, first of flax, then of jute, hemp, wool, leather, and hides.
Part II gives a brief account of the manner in which these com-
modities were handled and the way in which the boot industry
was organized for war purposes. A longer and more detailed
account is inserted of the organization of British Wool Purchase,
since this represented the first attempt to apply control on a large
scale to agricultural produce.

Part III contains a description of Meat Control under the
Ministry of Food. It illustrates, perhaps better than any other
scheme, the difficulties of controlling supplies and prices of a
perishable commodity needed for the daily consumption of the
whole nation. Importers, farmers, dealers, wholesale traders, and
retail butchers—all these had to be virtually combined in a single
State Meat Trust, in order to ensure that the meat cards issued to
every man, woman, and child in the country should be punctually
honoured on presentation at the butcher’s shop.

The account of oils and fats control which follows explains the
manner in which manufacture, import, and wholesale distribution
were organized on State account by self-governing Trade Asso-
ciations. The survey of the meat and fats trades ends with
a short account of the control of milk, butter, and cheese.

Tn Part IV an attempt is made to examine the general principles
of war organization. Price-fixing, the State as importer, the
costings system, the control of agricultural produce, of manu-
facture and of wholesale trade, are treated from a comparative
point of view with illustrations drawn from the chapters that
have gone before. The last chapter summarizes some of the
lessons and consequences of war-time control with special reference

xiv PREFACE

to the problems of large-scale organization and public administra-
tion.

The writer received permission in 1919 from the War Office and
the Ministry of Food to make use of official sources of informa-
tion; but neither Department is in any way responsible for the
statements made, for the conclusions drawn, or for the manner
in which the facts are presented.

I have endeavoured to keep the narrative as objective and im-
personal as possible and have only occasionally mentioned by
name the civil servants and business men whose struggles and
achievements are here recorded. It would be ungracious, however,
not to pay a sincere tribute of admiration to the work of my
former chiefs, Mr. U. F. Wintour, C.B., C.M.G., and Mr. E. F. Wise,
C.B., to whose vision, resourcefulness, and inspiring leadership
the country owed so much during the war, and to the many
distinguished business men who served under them at the War
Office and the Ministry of Food—Sir Edward Penton, K.B.E.,
Director of Boots and Leather Supplies; Col. F. V. Willey, C.M.G.,
C.B.E., M.V.O., Controller of Wool Supplies ; Sir Charles Sykes,
K.B.E., Director of Wool Textile Production ; Sir James Beattie,
K.B.E., Controller of Flax and Jute Goods ; Mr. George Malcolm,
C.B.E., Controller of Raw Jute and Hemp; Mr. W. H. Gardner,
Controller of Flax Supplies; Sir Francis Boys, K.B.E., Director
of Meat Supplies; Sir Philip Proctor, K.B.E., Deputy Director
and later Director of Meat Supplies ; Sir William Wells, K.B.E.,
Chief Live Stock Commissioner; Sir Alfred Mansfield, K.B.E.,
Director of Oils and Fats ; Sir Campbell Kirkman Finlay, Director
of Oilseeds Supply ; Mr. Wilfred Buckley, C.B.E., Director of
Milk Supplies; Mr. William Lovell, C.B.E., Director of Butter
and Cheese Supplies; and lastly, to Sir James Cooper, K.B.E.,
Director of Raw Materials Finance, and Sir Harry Peat, K.B.E.,
Financial Secretary of the Ministry of Food, upon whose skilled
collaboration in costings and finance the schemes described were so
largely dependent for their success. To these and other friends and
colleagues whose names I have reluctantly had to omit, I dedicate
this book. EK. M. H. LLOYD.

January 1924.

CONTENTS

INTRODUCTION. 4 : : c A “ 1

The paradox of war— Patriotism and social idealism — Disillusionment
after the war— Was the ‘ larger air’ an illusion ?—The background of
State control— Corporate feeling stronger than self-interest.

PART I
ORIGINS OF{CONTROL AT THE WAR OFFICE
CHAPTER I. ARMY SUPPLY IN PEACE AND WAR. Syme syeanG

Historical background — Army supply under Queen Elizabeth —
Cromwell’s reforms — Corruption returns with the Restoration —
Abuses in Marlborough’s time — Scandalous mismanagement during
Napoleonic wars — Sufferings of the troops in Flanders and West
Indies — Corruption at the War Office— Duke of Wellington’s
reforms — The Crimean scandals — ‘ Old-fashioned departmental-
ism’ — Growth of integrity and efficiency in the public services —
Results of democracy.

Origin of Army Contracts Department — Purchasing machinery of
British War Office in 1914 — Functions of Contracts Department and

Supply Departments — Army factories — Efficiency of pre-war
system.

CHAPTER II. THE OUTBREAK OF WAR 4 : LS

Normal routine continued — Appeal for 500,000 volunteers —
Centralized buying breaks down — Story of jerseys bought by local
commands — Paralysis at head-quarters— Purchases by Allied
Governments — Commission Internationale de Ravitaillement —
Unemployed harness-makers and Army saddles — Lord Kitchener’s
intervention — Proposals for reorganization of Army buying —
Necessity for organizing industry first realized November 1914 —
Reluctance to interfere with private enterprise — Nationalization of
armament firms rejected — Ministry of Munitions established May
1915 — Provision of food, clothing, and miscellaneous equipment
remains with Army Contracts Department — Origins of State control
in the War Office.

CHAPTER III. FROM COMPETITIVE TENDERING TO COLLEC-
TIVE BARGAINING : ; ; 5 ° c 3 - 26

Speculation in Army supplies — Delays inherent in tendering system
— Public criticism of high prices paid — Comparison with business
methods — Establishing personal contact — Widening area of sup-
ply — Work of the Labour Exchanges — The laws of supply and
demand and ‘business as usual’ — Effect on prices of raw and
subsidiary materials — Weakness of competitive tendering — New
policy of collective negotiations — Agreement with Wholesale
Clothiers’ Association — Objections to the ‘flat rate’ principle —
Advantages of new system — Difficulties still unsolved.

XVl CONTENTS

PAGE

CHAPTER IV. REQUISITIONING AND COSTING IN THE JUTE
INDUSTRY . é A é ; 3 5 : - 385

Jute production and consumption — Importance for military pur-
poses — Demand for sandbags — Course of prices up to March 1915 —
Decision to requisition — Stocks at Liverpool — Negotiations at
Dundee — Cost and market price — Profits of Spinners — The costings
system first suggested — Objections to the plan — Appointment of
agent firm — Increased output and deliveries — The plan in opera-
tion — Comparison of Government price and market price — Negotia-
tions with Calcutta — Prices and quantities — An avalanche of sand-
bags — Economies affected.

CHAPTER V. THE LEGAL BASIS OF CONTROL . : : c 50

Defence of the Realm Act — Royal prerogative — Losses Commission
— Compensation a matter of grace — Requisitioning under the Army
Act — ‘ Fair market value ’ — Regulation 2 8 — Requisitioning from
merchants and growers — Maximum prices and requisitioning —
Amendment of Regulation 7 — Prices to be fixed with reference to
cost of production and fair profit without regard to market price —
Compulsory examination of books — February 1916 the turning-point
in costings system — No Parliamentary sanction — Regulation 30 a —
Prohibition and regulation of private dealings — Licensing and
price-fixing — Government monopoly — Regulation 2 the most
comprehensive basis for control — Were the Regulations ulira vires ?

PART II

TEXTILES AND LEATHER

CHAPTER VI. RUSSIAN FLAX AND CONTROL OF THE LINEN
INDUSTRY . . 8 3 : ; : 5 . - 65

Extension of costings system to linen industry — Comparison with
jute industry — Difficulties in supply of raw material — Closing of
the Baltic — Decision of War Office to monopolize purchase of
Russian flax — Appointment of buying agencies in Russia — Flax
offices opened in London, Dundee, and Belfast — Co-operation of
spinners and manufacturers — Improvements in supply of raw
material — Results of trading operations — Profits and risks — Usual
accounting methods not applicable — Government departments and
business firms — Controller and Auditor-General and audit of flax
accounts in Russia.

Work of Flax Control Board — Aeroplane linen — Increase of flax
production in United Kingdom — Purchase of seed — Rationing and
control of manufacture — Local Committees — Centralization and
decentralization of control.

«

CONTENTS XVii

PAGE
CHAPTER VII. PURCHASE OF RAW JUTE AND MANILA HEMP. 79
Decision to buy raw jute for military purposes — First agency agree-
ment — Objections in Caleutta — Appointment of Jute Commissioner
and allocation of orders in India — Third and final system adopted —
Purchase in the market in competition with manufacturers — Prohibi-
tion of import of jute, February 1917 — Steps to control prices and
ration supplies — Resumption of private imports and methods adopted
— Licensing private purchases — Effect on prices in India and
United Kingdom — Purchases for Allied Governments — Results of
Government trading in jute.
Position with regard to Manila Hemp, April 1917 — Freights,
prices, and profits — Government purchase — Appointment of buying
and distributing agents — Selling prices — Course of market prices
in the Philippines — Results of trading operations.

CHAPTER VillG ARMY BOOTS bet «25 ee) See ho bel ot

The Duke of Wellington on army boots — Achievements of boot
industry during the war — Quantity, quality, and price — Organiza-
tion and co-operation between Government and industry — Early
developments — Appointment of business organizer — Stimulation
of production — From trade patterns to regulation patterns —
Examination of costs and profits — Fixing different prices for
individual firms — Objections to strict application of costings — New
system of group prices — District Committees — Levelling up the
inefficient.

Boot repairs — A large-scale industry run by the War Office — New
methods and new machinery.

War-time boots — Extension of costing and control to supplies
for civilian population.

CHAPTER IX. HIDES AND LEATHER . - 5 : - 101

Shortage of leather for military purposes in first six Senge of war —
Prices rise — First intervention of War Office in January 1915 —
Conference of Tanners in Leathersellers’ Hall — Information of
probable requirements supplied in confidence — Agreement concluded
with regard to production and prices — Heavy hides in the home
market — Prices controlled by Tanners’ Federation — Extension
of control early in 1916 — Requisition of tanners’ output — Deter-
mining costs of production of leather — Reduction of tanners’ profits
— Standard prices for Army leather — Stocks in merchants’ hands
requisitioned at different prices based on cost price to holder —
Advantages of uniform maximum price — Allocation of leather to
manufacturers — Exchange of light leather for heavy hides from
France and Italy — Prices of hides in South America.

Government purchase of tanned kips from India for upper leather,
May 1916 — Supplies for civilian consumption — Curriers employed on
commission — Trading accounts analysed.

Government leather purchases in the United States — The Leather
Council — Review of Government’s policy and results of control.

1569.53 b

XVill CONTENTS

PAGE
CHAPTER X. THE POLICY OF WOOL PURCHASE : : 5 a lhe

Consumption of wool for military purposes — Figures for blankets,
flannel and khaki cloth purchased by the War Office — Restrictions
on export — First attempt to introduce costings — Review of wool
trade at beginning of 1916 — World scarcity foreseen — Necessity of
safeguarding supplies and controlling prices — State purchase of
British wool decided June 1916 — Negotiations with Dominion
Governments — Purchase of entire clips of Australia and New Zealand,
November 1916 — Advantages of centralized purchase — Standardiza-
tion of prices and qualities — Methods of distribution and sale —
Hardships inflicted — Elimination of middlemen.

CHAPTER XI. BRITISH WOOL PURCHASE . : 5 - 125
Preliminary difficulties — Variety of trade customs — Scottish wool
trade — Organization of trade in England — Special conditions in
Ireland and Wales — Plan adopted in Great Britain — Price and
valuation — Wool areas and local staff — Local and Central Advisory
Committees — Authorized merchants — Allocation of clips — Methods
of purchase — Complaints — Skin wool — Manx wool — Free car-
riage — Distribution and sale — Trading accounts.

CHAPTER XII. THE WOOLLEN AND WORSTED INDUSTRIES . 148

Topmaking — Woolcombing on commission — Topmakers as Govern-
ment agents — Conversion costing — Economies effected — New
specifications and use of rags and waste — Allocation of contracts —
Decentralization — Restrictions on civil trade in 1917 — Central
Wool Advisory Committee — Priority scheme — Reduction of hours
— Discontent in the industry — Appointment of Board of Control] —
Partnership between Government, employers, and labour — Standard
clothing scheme — Application of costings to civilian products —
Working of the scheme — Abandonment after the war.

PART II

MEAT AND FATS

CHAPTER XIII. THE MEAT TRADE AND WAR PROBLEMS Pelion

Meat shortage during the war — Popular demand for Government
control, May 1917— Meat (Sales) Order, 1917 — Description of
Meat Trade — How the retail butcher obtains his supplies — Farmer’s
methods of sale — Distinction between live weight and dead weight
— Preference of farmer for live weight— Links in the chain
between the farmer and the butcher — Regulation of supply and
demand under normal conditions — The American Meat Combine
and the price of cattle — Automatic regulation of distribution —
The meat problem during the war — Original scheme of control —
Objects aimed at — Municipal control of retail distribution — Pro-
posals for price reduction — Reserve of meat more economical
than reserve of cattle

CONTENTS xix

PAGE
CHAPTER XIV. THE PERIOD OF TRANSITION . é c - 166

Preliminary steps — Progressive reduction of prices — Live weight
difficulties — Criticisms of price policy — Reduction of herds — The
glut and the subsequent shortage — Appointment of Central Live
Stock and Meat Trade Advisory Committee — Standardization of
cuts — Wholesale Meat Supply Associations and their functions —
Census of meat sold retail — Licensing and registration of traders —
Inadequacy of fixing retail maximum prices — Threats of butchers’
strike — Limitation of consumption — Crisis in the last week of
December 1917 — Complete control established — State purchase of
all live stock for slaughter — Pooling expenses of distribution — The
Central Live Stock Fund — The meat trade as a national service.

CHAPTER XV. MEAT CONTROL IN OPERATION : . 179

The crisis surmounted — Organization of live stock contro! —
Duties of auctioneers — Grading Committees and schedule of prices
— Allocation to butchers — Farmers Selection Committees — Assess-
ment of supply quotas — Regulation of demand — Meat rationing
introduced February 1918 — Registration of customers — Meat
permits — Machinery of distribution, in Food Committee areas,
in Live Stock areas, and at head-quarters— Functions of meat
agents, Wholesale Meat Supply Associations, Importers Committees,
National Meat Distribution Committee — Government slaughter-
houses and the dead-weight system — Smithfield Control Board
— Central Live Stock Fund — Meat finance — Irish imports — Frozen
meat imports.

CHAPTER XVI. OILS AND FATS . : : ‘ : : - 201

Meaning of term ‘oils and fats’ — Processes of manufacture —
Sources of raw materials — Normal channels of trade — Margarine
industry — Glycerine requirements — Intervention of Ministry of
Munitions — Appointment of Controller — The ‘ Grand Committee’
— Original scheme of control — Opposition of the trade — Licensing
and Maximum Prices Orders, May 1917 — Statistics and research —
Danger of fat shortage — Preparations for State purchase of oilseeds —
Problem of prices and distribution— Appointment of Advisory
Committees — Growth of combination and corporate feeling.

CHAPTER XVII. NEGOTIATIONS WITH CRUSHERS AND
BROKERS . : - J : : 8 : c . 210

Investigations into costs of crushing and refining — New system of
book-keeping introduced — Provisional ‘ margins’ fixed — Problem
of adjusting maximum prices for seed, oil, and cake — Variations in
cost between different firms — The ‘ marginal ’ and the average cost —
The principle of a common pool — Discussion of plans for pooling —
Scheme for a Crushers’ Combine rejected — Profit Equalization
Scheme — Transit Pool — New margins agreed, November 1917 —
Adjustment of maximum prices — Requisition of seeds, nuts, and

b2

xx CONTENTS

PAGE
kernels, and of oils, oileake, and meals — Difference between old and
new prices debited to holders of stock.
Arrangements for distribution — Employment of brokers — Forma-
tion of United Kingdom Oilseeds Brokers Association as sole Govern-
ment agents — Allocation of work and remuneration among members
— Smooth working of commercial side of distribution.

CHAPTER XVIII. OILSEEDS SUPPLY AND THE INTER-ALLIED
OILSEEDS EXECUTIVE . . . ° . - 220

Inter-Departmental Conferences on oilseeds supply, August 1917 —
Proposal to centralize purchases and shipping arrangements —
Negotiations with French Minister of Commerce — French demand
for pooling resources — Finance and shipping dealt with separately —
Terms of agreement constituting Inter-Allied Oilseeds Executive —
Not a joint trading corporation.

Machinery of purchase — Purchases made f.0.b. not c.i.f. — Reasons
for this — Methods of purchase varied — Co-operation of Governments
in British Dominions and Possessions — Egyptian cotton seed —
Terms of purchase — Appointment of Cotton Seed Control Board at
Alexandria — Coco-nut oil from Ceylon — Linseed, rape seed, and
eastor seed from India — Argentine linseed — Animal fats from
South America, Australia, and New Zealand — Purchases in U.S.A. —
Whale oil — Olive oil — West African oleaginous products obtained
by purchase c.i.f. — Ministry of Food’s monopoly of import — Ton-
nage programme 1917-18 and 1918-19.

CHAPTER XIX. MARGARINE AND EDIBLE FATS = 2 . 230

Prejudice against margarine — Its composition — Figures of con-
sumption 1913-16 — Weekly supplies of butter and margarine com-
bined during 1917 — Reduction of imports from Holland — Increase of
home production — Maximum Prices Order, November 1917 — Un-
even distribution — Alarming increase of queues in December — Local
rationing and requisitioning — Preparations for complete control —
Fewer trade connexions to be broken— The Margarine Clearing
House — Functions of local officials — New machinery of distribution
working smoothly, June 1918.

Control of quality — Expert inspection and guidance — Weekly
samples submitted — Results of examination published — Comparison
of marks gained — Improvement in refined oils — Other edible fats
and oils — Advantages of standard specifications.

Control of dripping and tallow — The problem of relative prices —
Tallow Melters Association formed — Standardization — Sampling
and testing — Results of organized competition in quality.

CHAPTER XX. MILK, BUTTER, AND CHEESE . 6 A 245

Shortage of milk during winters of 1917 and 1918 — Statistics of
production and consumption — Condensed milk — Organization of
the trade — Importance of wholesale firms and milk factories —
Report of Sub-Committee on wholesale trade in milk — Waste, over-
lapping and unequal distribution due to lack of co-ordination —

CONTENTS Xx]

PAGE
Scheme of control proposed — State purchase recommended — Tem-
porary measures of control adopted — Wholesale rationing and
priority — Work of Divisional Commissioners — Introduction of
certified grades of milk.

Purchase of Australian and New Zealand cheese for the Army by
Board of Trade — Ministry of Food negotiates voluntary price
agreements, April 1917 — Legal maximum prices, August 1917 —
Extension of cheese control — Control of butter prices — Centralization
of import, December 1917 — Functions of Butter and Cheese Imports
Committee — Long term contracts and purchases in open market —
Argentine, South Africa, Canada, United States, Denmark, France,
Holland — Pooling of purchases and averaging of prices — Results
of policy adopted.

PART IV

COMPARATIVE STUDIES
CHAPTER XXI. THE PROBLEM OF WAR ORGANIZATION . - 209

Two axioms: subordination of private interests and as little inter-
ference as possible — Distrust of State management — ‘ Business as
usual ’ — Nationalization of armament industry rejected in 1914 —
Contrast with Government action in regard to finance, railways, and
sugar — War profits a legitimate expectation for armament share-
holders — First year of war — Obtaining supplies — Speculation
replaced by collective agreement — The price problem — Growth of
control in the second year — State purchase of raw materials — Fur-
ther developments in third and fourth years.

Principles of war organization — Economy of man-power, finance,
transport, production, and consumption — Impossible to realize fully
in practice — Psychological factors.

CHAPTER XXII. ORGANIZATION OF INDUSTRY : : . 270

Crisis in 1917 — Review of situation by Army Contracts Department
— Man-power, production, export trade, consumption — Measures
already taken inadequate — Need for treating each industry as
a unit — Illustration from woollen and worsted industries — Man-
power and Production Committees — Constitution and functions —
Advantages of joint control — Promotion of export — Exporters
Committees — Restriction of imports — Centralized purchase of raw
material — Importers Committee — Division of functions between

Departments.
CHAPTER XXIII. THE MECHANISM AND THEORY OF PRICE
FIXING ; : : c : : 3 : - . 282

The novelty of price control_-— Growth of an idea — Price control
for military purposes — Methods of the ring adapted for public
ends — Price fixing for civilian consumption more difficult — War.
time boots and standard clothing — Standardization and identifica-

Xxil CONTENTS

PAGE
tion by marks — Resemblance to sale of proprietary articles —
Control of supply, licensing, and rationing of demand — How far were
maximum prices observed ?

Theoretical objections to price fixing — Effects on production and
consumption — Price fixing used either to discourage or to encourage
production — Guaranteed prices for farmers — Reduction of con-
sumption by rationing rather than by destitution — Effect on prices
and consumption of non-rationed articles — Continual extension of
control — The right balance of prices — Diversion and transference
of purchasing power — Price control and inflation — Was inflation
inevitable ? — The alternative.

CHAPTER XXIV. THE STATE AS IMPORTER : ; . 299

Reasons for State purchase — Sugar — Meat — Flax — Kips
Jute — Wool — Hemp — Butter and cheese — Oilseeds — Summary
of reasons — Methods of purchase — Dominions — India — Crown
Colonies — Egypt — Russia — United States — Neutral countries.

Purchasing organization — Union of official and business methods —
Variety of forms — Centralization in wool — Decentralization in
oilseeds — Buying agents in flax and hemp — Contrast with jute —
Official buying mission for food purchases in U.S.A. — Semi-official
trade organization in butter and cheese.

Must State import be a monopoly ? — Conditions of success in
Government trading operations — Business men as officials — Charges
of incompetence — Competition versus centralization the issue —
Recent tendencies in producing countries.

CHAPTER XXV. THE COSTINGS SYSTEM . : < : . 316

Profiteering and the costings system — Costing in private business —
Machinery of cost investigations — Pre-war indifference to costing —
Employment of chartered accountants — Work of Costings Depart-
ment at Ministry of Food — Confidential nature of work — Regulation
2 G — Distinction between items chargeable to cost and to allocation
of profits — Adjustment to varying circumstances.

Cost of production in economic theory — Prices normally determined
by marginal cost of production — No longer applicable in war-time —
Limitations of monopoly profits by costings system — Complexities
of applying the costings principle — Distinction of Government
requirements and civilian needs — Treatment of importers, whole-
salers, retailers, manufacturers, farmers — Objection that costings
system gives large profits to best firms — Differential rent under
normal conditions — Without costings system war profits would have
been larger — Not always necessary to base prices on highest cost —
Striking divergence in costs between efficient and inefficient firms —
Bearing of this on economic laws — Survival of the unfit increases
differential rent — Average costs as basis of fixed prices — Pooling

and unification — Application to distribution, manufacture,
agriculture.

CONTENTS XXlil

PAGE
CHAPTER XXVI. CONTROL OF AGRICULTURAL PRODUCE . 331
Contrast between Germany and Britain — Difficulty of controlling
domestic produce — The balance of prices — Contrast with control of
manufacture — Application of costings to agriculture — A new science
— Differential or uniform prices — Maximum and minimum prices —
Methods of subsidizing — Effects of price control — Advantages of
guaranteed price.
Methods of marketing — Little combination or co-operation before
the war — Centralization necessary for control — Comparison of
methods — Relations between Government and farmers — Advisory
Committees — Agricultural Council — Parliament.
Valuation and grading — Fixed prices and different qualities —
Gresham’s law applied to commodities — Improved methods of
standardization — Grading of milk.

CHAPTER XXVIII. CONTROL OF MANUFACTURE 5 - . 3847
Control of industry as part of wider problem — Gradual growth of
unification — Collective agreements, control of raw materials, costings
system, rationing of raw materials and standardization of product —
Application to civilian trade.

No interference with ownership or management of factories — Re-
strictions on buying and selling — Similarity to Kartel system —
Costing and transfer of products at fixed prices — Similarity to
vertical trust — Vertical combination of horizontal associations in
oils and fats — International combination — Association not amalga-
mation of separate firms — Representative governing bodies and
advisory committees.

Limitation of profits and price-fixing simpler in manufacture than
agriculture — ‘ Taking possession’ of factories and costings system
compared — Problem of securing efficiency and economy — Com-
parison with methods of trust — Inducements to economy retained —
Competition in quality — Organized competition and encouragement
of initiative in large-scale organizations.

CHAPTER XXVIII. TRADERS AS GOVERNMENT AGENTS . . 363
Functions of merchants and middlemen — Different relationships
between Government and traders — Individual agency agreements —
Coliective agreements — Controlled monopolies — Semi-official trade
organizations — Direct distribution by Government — Employment
of all or selection — Customary trade channels maintained or abolished
— Trade practices modified — Remuneration by flat-rate, sliding
scale, percentage, fixed maximum, lump sum — Financing by traders
or by Government — Guarantees any loss — Control simplified by
delegation of responsibility — Summary and classification of agency
arrangements.

CHAPTER XXIX. ORGANIZED DISTRIBUTION . : : - 372
Adjustment of supply and demand at fixed prices — Rationing
and organized distribution — Contrast with free market — Cotton
and grain markets — Futures, crop statistics, standardization,
speculation — Other produce markets— No futures, imperfect

XX1V CONTENTS

standardization — Unorganized markets — Influence of rumours
and commercial instinct — A story of cement — Monopoly distribution
— Centralized planning and adjustment — Changes of price less
frequent — Uniform prices in different places — Standardization of
quantities and qualities — The importance of reserves.

The clearing-house system under control — Jute, flax, hemp, wool,
meat, vegetable oils and margarine — The zoning system — Economy
of transport — Financial pooling — Free carriage — Averaging costs
— Selling price determined by average rather than marginal cost —
Pooling costs of related products — Soap, paint, and margarine.

Post-war developments — Gold, petroleum, rubber, and grain —
Possibilities and limitations of organized distribution.

CHAPTER XXX. REACTION AND RECONSTRUCTION

The transition from war to peace — Conflict of opinion on the future
of State control — An overwhelming demand for freedom — Perma-
nent influences of war-time control — The study of administration —
Decentralization and initiative— Delegation of responsibility — Dis-
tinction between business administration and administration of law —
Publicity — The importance of criticism — Advisory Committees —
Statistics and quantitative measurement — Civil servants and
business men — The results of co-operation — The qualities necessary
for successful administration — Administration as a profession —
Effect of control on industry — Development of combination —
Reaction after the war— The need for stability — Merchants as
agents — Marketing as a profession — Progress and stagnation —
Conclusion.

APPENDICES

. Agreement constituting the Commission Internationale de Ravitaille-

ment

. Royal Commission of foe ane March 31, 1915, as “e cmon

tion in respect of loss or damage to property or business in the
United Kingdom occasioned by. exercise of rights and duties in
the defence of the Realm

3. Flax and Flax Seed Account
4. Raw Jute Account
5. Manila Hemp Account . :
6. Boot and Leather Committees
7. British Wool Areas E ,
8. Memorandum on Control of Meat Supelics (Tux une 6, 1917) : :
9. The Cattle (Sales) Order, 1917." Dated December 24, 1917
10. The Sheep (Sales) Order, 1918. Dated January 15, 1918 .
11. Circular Letter to Oil Seed Crushers (November 29, 1917) .
12. Joint Executive for Vegetable Oils and Oil Seeds : Memorandum of
Agreement : c : - 9
13. Ministry of Food — Costings Department : Oils and Fats. Memo-
randum of Instructions to the District Supervising Accountants
14, Letter from Lord Rhondda to the Secretary of the Ministry of Food
on State purchase of the Wholesale Milk Trade . é
INDEX . : ; : 5 : : : é 4

PAGE

387

3899

451

INTRODUCTION

The paradox of war — Patriotism and social idealism — Disillusionment
after the war— Was the ‘larger air’ an illusion? — The background of
State control — Corporate feeling stronger than self-interest.

* War is the ruin of nations,’ said Louis XIV on his death-
bed, after a reign devoted to the military aggrandizement of
France. ‘ The sword settles nothing,’ said Napoleon at St. Helena.
To-day the whole world has learnt the same lesson. The tragedy
of the great war has branded into the world’s consciousness a horror
and loathing of war itself as of something utterly hideous, ruinous,
and vile. *

And yet there remains the paradox, which military apologists
have so often urged, that war evokes some of the finest qualities
in human nature. The last war is no exception. Just as its
appalling evils exceeded in magnitude and horror those of all
previous wars, so the self-sacrifice, courage, disinterested service
—and even, one might add, the achievement of willing and
effective co-operation, nationally and internationally, between
vast masses of men, surpassed anything that would have been
thought possible in time of peace. In almost every belligerent
country the same phenomena were found—an intense patriot-
ism that rose at first to the height of a religion and found its
expression in the sacrifice not only of life itself, but of wealth,
comfort, and the habits of a lifetime; a readiness to make
experiments and adjustments in social and economic organiza-
tion with astonishing rapidity and in defiance of precedent
and tradition; and a concentration of massed endeavour and
willing service that made light of almost insuperable obstacles
and compressed the evolution of years into as many months.
For the first time in history the world began to have a vision
of what human association, raised to its highest degree, might
accomplish. No wonder that the statesmen who were able
to evoke such extraordinary manifestations of social harmony
and social energy, believed or professed to believe that after

1569.53 B

2 INTRODUCTION

the war things would never be as they had been before, that
in a few years the ills and injustices of centuries would be re-
dressed and that the social system would be rebuilt on just and
enduring foundations.

The memory of those few years of collective endeavour is
something that many who now find themselves discarded or
outcast recall almost with feelings of regret. During the war the
humblest, the most aimless, and the most despised were filled with
a new vision of usefulness and purpose in their lives. Their
country wanted them. ‘ All the qualities of a man acquire dignity
when he knows that the service of the collectivity that owns him
needs them.’! Patriotism evoked unsuspected capacities and
transformed the despondent, the cynical, and even the vicious
from parasites or sufferers into heroes and idealists. In many
indolent and selfish lives the war, for a time at any rate, worked
a moral revolution. Social relations were transformed, not by
legislation or by organization from without, but by individual
regeneration from within.

This is not the whole of the truth, but it is the side that is
most easily forgotten in the mood of disillusionment that has
followed the war. Dishonesty, cruelty, and treachery are no less
the fruits of war than heroism and self-sacrifice. The profiteer,
the food-hoarder, the dishonest contractor, and the tyrannical or
incompetent official were more in evidence in war than in peace,
partly because war provided greater opportunities, but partly also
because the atmosphere of war was demoralizing as well as
stimulating.

And its evil effects are not confined to the war period. The
after-effects of war upon conquerors and conquered alike are
almost as devastating as the war itself. The state of European
society since the Armistice has been marked by the worst features
of war psychology with none of its redeeming qualities. Dreams
of social reconstruction have been shattered. In every country
the union sacrée has. been dissolved. There is no common purpose
to keep men together. Suspicion, revenge, class-feeling, and
outraged nationalism have reopened great rifts in human society,
and economic and social life is suffering a violent reaction from

1 William James, Memories and Studies, p. 285.

INTRODUCTION 3

the hothouse growths of war. Loyalty to their leaders and willing
response to the call for public service have given place in men’s
minds to a mood of profound distrust in the capacity of govern-
ments to govern and of statesmen to lead. The privations of
peace have in many countries been as severe as the privations of
war, and the men who successfully strove to organize the world’s
resources for the prosecution of the war declare themselves
helpless to repair the deficiencies and harsh injustices of peace.

So prompt have we been to forget the new spirit which grew
up during the war that when we read again the contemporary
literature of the war period—not the literature of war aims but
sober plans of reconstruction—the change that has taken place
in so few years seems like the difference between youth and age.
There is a poignant irony in reading again such sentences as
these :- “ Life seems wider and more impersonal. Our fellow-
countrymen seem nearer to us. Rank and class seem to count for
less. All have suffered alike and all have served alike, and all
have the same world to live in and repair—a world that seems
lonely at times beyond all bearing, yet is lit up with the flame of
sacrifice and the undying memory of those who are gone. . .
People have come to realize that what is needed is not a mere
transitory programme to enable life to resume its normal pre-war
channel, but some larger and more permanent policy, conceived
in the spirit which the war has revealed. . . . Men who have
breathed the larger air of common sacrifice are reluctant to return
to the stuffy air of self-seeking.’ +

‘The stuffy air of self-seeking ’ is so suffocating to-day that
many have forgotten what it felt like to breathe the larger air.
They remember only the pains and discomforts, the lying and
corruption, the suppression of liberty, the profiteering, the waste,
and the mismanagement. In every new account of what happened
during the war we expect to learn only fresh scandals, fresh evi-
dence that the * larger air’ was an illusion, and that the men who
stayed at home were guided not by any ideals of public service
but by the narrowest self-interest and class antagonism.

The historian of events so recent must beware of this mood of
disillusionment. He must admit the idealism of war as a fact.
1 A, E. Zimmer, Nationality and Government, 1918, pp. 244, 245.

B 2

4 INTRODUCTION

however illusory its fruits. Evanescent and conditional though
it was, it supplies an essential background to the subject-matter
of this book.

In his well-known essay on The Moral Equivalent of War
William James suggests one of the lessons to be learned from the
psychology of war. ‘The War Party’, he says, ‘is assuredly
right in affirming and reaffirming that the martial virtues, although
originally gained by the race through war, are absolute and
permanent human goods. . . . Men now are proud of belonging to
a conquering nation, and without a murmur they lay down their
persons and their wealth, if by so doing they may fend off sub-
jection.’ He then raises the pregnant question, how far it may be
possible to retain the martial virtues by substituting as the
occasion for their exercise the constructive interests of society in
place of its defence against external aggression. ‘ Intrepidity,
contempt of softness, surrender of private interests, obedience to
command, must still remain the rock upon which States are
built. . . . It would be simply preposterous ’, he concludes, ‘if the
only force that could work ideals of honour and standards of
efficiency into English or American natures should be the fear
of being killed by the Germans or the Japanese.’ !

The ‘ fear of being killed by the Germans ’, whether or not it is
the only force that can evoke such a response, did in fact work
a surprising transformation in current standards of honour and
efficiency. Traders and manufacturers learnt to subordinate
their interests to social ends; workers were induced to work
longer hours, to surrender time-honoured customs, and to speed
up production ; and wealthy consumers learnt to bear their share
in the deficiencies of food and fuel. The higher standards of
honour and efficiency, which were commented upon during the
war and aroused large hopes of social reconstruction, were not
altogether illusory. Even in the sphere of civilian administration,
with which this book is concerned, the organization of State
control was an expression of corporate feeling and collective
responsibility of a far more intense kind than that which binds
society together in times of peace.

But if social idealism supplies the background, the fore-

+ William James, op. cit., pp. 288-95.

INTRODUCTION 5

ground of the picture is a jungle of conflicting private interests.
Every restriction on civilian freedom, every limitation of the right
to strike and the right to profiteer aroused vigorous opposition.
The civilian’s duty in time of war was a fluctuating code of
negative rather than positive injunctions. It was immoral to
oppose conscription for the Army, but it was not immoral to
obstruct conscription of labour or conscription of wealth. It was
only gradually that patriotic emotion became effective in matters
of no direct military concern. Men reacted vehemently and
naturally against trading with the enemy ; but it was difficult to
regard a breach of food and fuel restrictions with the same moral
fervour. In spite of the new spirit which rendered closer cohesion
and organization possible there were strong centrifugal tendencies
which had to be overcome. Lack of imagination, habit, and self-
interest were the rocks over which each scheme described in this
book had to be steered with anxious circumspection. Not the
least of Lord Rhondda’s achievements as pilot of the nation’s food-
ship was that he understood the psychology of obstruction and
knew how to meet it with firmness and yet with sympathy.

But when all is said, the wonder is not that individualism was
so strong, but that corporate feeling was stronger. Hateful as was
the need and hideous the result, yet the temper and method of
war organization still leave a hope that human association may
accomplish miracles. The machinery, the technical capacity,
the uncanny secrets of science are there to be used; it is only
men’s minds which refuse to devote them to the service of peace
and life.

PART I
ORIGINS OF CONTROL AT THE WAR OFFICE

CHAPTER I
ARMY SUPPLY IN PEACE AND WAR

Historical background — Army supply under Queen Elizabeth — Cromwell’s
reforms — Corruption returns with the Restoration — Abuses in Marlborough’s
time — Scandalous mismanagement during Napoleonic wars — Sufferings of
the troops in Flanders and West Indies — Corruption at the War Office — Duke
of Wellington’s reforms— The Crimean scandals — ‘ Old-fashioned depart-
mentalism ’ —.Growth of integrity and efficiency in the public services — Results
of democracy.

Origin of Army Contracts Department — Purchasing machinery of British
War Office in 1914 — Functions of Contracts Department and Supply Depart-
ments — Army factories — Efficiency of pre-war system.

Tur administrative experiments described in this book, which
arose out of the need for equipping an army and organizing
a nation for war, were of a kind and magnitude unprecedented in
history. Never before, except possibly under the Incas of Peru,
had civil administration been called upon to play such a part in
the life of a nation. Towards the end of the war the Army had
become practically coterminous with the community, and the
scope of Government activities extended over nearly the whole
field of civilian life. Public administration was utterly unprepared
for such a task; nor was its record in the past such as to inspire
confidence. Even the simpler business of equipping the small
armies of previous wars had rarely been conducted with con-
spicuous success. Army contracts was a phrase that connoted
corruption and mismanagement. It may be useful, therefore,
to glance briefly at the history of this branch of public adminis-
tration, before describing the efforts made by the War Office in
1914 to escape the reproaches of incompetence so freely flung
at it, and to dissipate some of the suspicion and mistrust bred of
centuries of army scandals.

‘It is an unpleasant thought’, says Mr. Fortescue, reviewing

ARMY SUPPLY IN PEACE AND WAR a

the seamy side of army administration in the past, ‘ that dishonesty
and peculation should be inseparably associated with so much
that is noble and heroic in human history, but the fact is indis-
putable and must not be lightly passed over.’ ! Nor is it a pleasant
thought that the higher moral standard that has become general
in public administration during the last fifty years should have
rendered it possible to carry on the most tragic war in history.
But the fact remains. War on the modern scale can only be waged
by nations that can rely on a reasonably high standard of honour
and efficiency in the public services.

For the greater part of English history neither Parliament nor
the Crown took adequate steps to ensure that the Army was
properly fed and clothed. Each regiment was regarded as the
colonel’s property, and the profit he made on clothing his men
was in time of peace his chief source of income. In Queen
Elizabeth’s time the soldier’s pay was 8d. a day or £12 13s. 4d.
a year. The commanding officer drew the pay and was entitled
to deduct £4 2s. 6d. for clothing and £7 8s. 4d. for victualling,
leaving only £1 2s. 6d. for the soldier. In consequence of this
system commissions were bought and sold, and it became a
regular practice to falsify the muster roll in order to draw pay for
a fictitious number of men.”

This system was for a time swept away by Cromwell. The
purchase of commissions was abolished, and with it went a mass
of corruption and fraud. The New Model Army was not only
better disciplined but had a higher morale than the old army.
With the Restoration, however, the old abuses returned, and
under Charles II corruption was rampant from the highest to the
lowest. The Paymaster-General was responsible to the King
alone, and took a commission of 5 per cent. on all pay issued to
the Army. Civilian officials, such as auditors, commissaries, and
their subordinates, obtained their livelihood by a system of fees
and perquisites. Officers were forced into dishonesty by the
withholding of their pay by civilian officials in London. Captains
of companies stationed in Ireland appropriated the entire pay
of their men and turned them loose to live by plundering the

1 Hon. J. W. Fortescue, History of the British Army, vol. 1, p. 31.
2 Thid., p. 156.

8 ORIGINS OF CONTROL AT THE WAR OFFICE

inhabitants. The evils of corruption which had been checked by
the Puritans were now firmly established, and were not eradicated
for nearly a hundred and fifty years. “The sin and shame of
England is that though she had once put away the accursed thing
from her, she returned to it again as the sow to her wallowing in
the mire.’ }

In 1702 the Paymaster-General, Lord Ranelagh, was convicted
of fraud, and the Paymaster-General’s office was reformed. In
1706 the Duke of Marlborough caused an inquiry to be made
into the abuses which prevailed in the clothing of the Army. In
spite of the mismanagement and corruption of the commanding
officers Marlborough was opposed to centralization of supply, and
the colonels were still left to provide for their men ; but a Board
of General Officers was appointed to sanction contracts and to see
that the colonels did their duty. During the war of the Spanish
Succession severe losses were suffered in the Peninsula and in the
West Indies owing to the breakdown of the supply services.
Marlborough himself was impeached for defrauding the Exchequer
by taking 24 per cent. commission on all bread supplied to the
Army in the Low Countries. The Duke was able to prove that
this was the usual practice, and that the funds so obtained were
used for paying the cost of the secret service, for which Parliament
made no provision. Marlborough was dismissed from his post,
but his successor, the Duke of Ormonde, was allowed by Parlia-
ment to continue the same practice. In 1712 a mutiny broke out
because the troops could get no bread at all.?

In the ill-fated expedition to Carthagena in 1740, which is
described by Smollett in Roderick Random, nine out of every ten
men. who sailed in the original expedition perished through sick-
ness or privation. The stores supplied were ‘ unspeakably bad ’,
the food was indifferent, and there were no nurses, doctors,
surgeons, or hospital supplies. The responsibility for this disaster
appears to rest chiefly with the incompetence and corruption
which prevailed at the War Office, but the system under which
colonels profiteered at the expense of their men contributed to
the breakdown.? According to the Report of the Commissioners

1 Op: cit., pp. 285-321.

eis ae . ® Ibid., pp. 409-560.
3 Thid., vol. ii, pp. 63-78.

ARMY SUPPLY IN PEACE AND WAR 9

on Army Expenditure in 1746, deductions for clothing were often
much in excess of the cost. In 1745 it was found that in the
Ist Horse Guards the deductions amounted to £2,823, and
the clothier’s account was £1,946, leaving a profit of £877 for
the colonel. This system was not abolished till 1854.1

The mismanagement of the Commissariat during the wars with
F rance, until the Duke of Wellington took it in hand during the
Peninsular War, are not facts on PNA historians usually dwell.
The Army suffered greatly from Pitt’s ideas of economy. The
Treasury paid large sums for raising recruits, and then allowed
thousands of them to be killed or disabled by small economies in
the supply of food, clothing, and medical attendance. At this
time a colonel’s nominal allowance for clothing each soldier
amounted to no more than £2 8s. a year, which involved him in
a heavy loss. The civilians in the military departments tried to
make money at the expense of the officers, and the officers were
compelled to recoup themselves at the cost of the men. The con-
sequence was that colonels took bribes from contractors, soldiers
were constantly in debt, food and clothing was bad, and desertion
was frequent. Pitt’s record as an economist is summed up in the
History of the British Army, as follows: ‘ Pitt allowed the soldier
to starve from 1784 to 1791, gave a grudging pittance in 1792, and
increased his pay threefold under threat of mutiny in 17977.’ ?

In these circumstances it is not surprising that the Duke of
York’s Army which fought in Flanders in 1794 is said to have
been worse clothed than British troops had ever been on any
previous recorded occasion. Raw recruits were sent across the
Channel without arms, ammunition, clothing, or medical stores.
The doctors and surgeons were convicted of inefficiency, dis-
honesty, and cruelty, the reason being that the Treasury refused
to pay the fees demanded by properly qualified medical men.*

During the long campaigns in the West Indies from 1794 to
1798 the troops were decimated by bad food and inadequate and
unsuitable clothing. This was due not merely to inefficiency but
to fraud and corruption. Many of the officers in charge of army

1 de Fonblanque, T'reatise on the Administration and Organization of the British Army,
00.

p. 40)
2 History of the British Army, vol. iii, p. 580; vol. iv, pp. 316-20.
00.

3 Thid., vol. iv, p. 3

10 ORIGINS OF CONTROL AT THE WAR OFFICE

supply made large fortunes. One Commissary is said to have
amassed £87,000 by shameless fraud. The whole service was
infected by the prevailing system of bribery and dishonesty.?

During this period the Secretary at War was Sir George Yonge,
who after leaving the War Office was appointed Governor of the
Cape in 1799, and was recalled in 1801 for having granted a
monopoly of the meat supply of the garrison to a firm of dishonest
contractors who allowed him a share in the profits.2, The War
Office under Sir George Yonge was ‘a sink of robbery and ex-
tortion’. The clerks and officials made their livelihood by a
recognized system of fees and customary perquisites. One official,
as part of the emoluments of his office, enjoyed the right to supply
coal to the garrison of Gibraltar as a profit.*

It is a relief to turn from this record of systematic corruption
to the achievements of the Duke of Wellington during the Penin-
sular War. Writing to Lord Castlereagh from Portugal in August
1808, he says: ‘I have had the greatest difficulty in organizing
my Commissariat for the march, and that department is very
incompetent ; the department deserves your serious attention ;
the existence of the Army depends upon it, yet the people who
manage it are incapable of managing anything out of a counting-
house.’ Later he writes: ‘Our Commissariat is very bad, but
it is new, and will improve I hope.’ It was largely owing to the
Duke’s own efforts and to the experience he had gained in his
campaigns in India, that in a few years the supply and transport
departments of his Army reached a comparatively high standard
of efficiency, and appear to have been distinctly superior to those
of Napoleon. The French armies were accustomed to live mainly
by pillage and requisitioning. But even so Napoleon was not
satisfied with his Commissariat. ‘ Envoyez-moi donc,’ he wrote
to the Directory from Italy in 1795, ‘un ordonnateur habile,
distingué, homme de génie ; je n’ai que des pygmées qui me font
mourir de faim dans le plus beau pays du monde.’ Sir Charles
Trevelyan states in a Memorandum written for the War Office in
1855 that the Duke of Wellington raised the organization of the
Commissariat so high that on the restoration of peace the French

1 Op, cit., vol. x, p. 192. ~ #® Thid., vol. iv, p. 872.
ERLOIGs nV Ole Xen ponL Oa

ARMY SUPPLY IN PEACE AND WAR 1]

Government sent Baron Dupin to inquire into the arrangements
which had proved so conducive to military efficiency. ‘It has
now become our turn ’, he adds, referring to the Crimean scandals,
*to learn from the French.’ ! i

During the nineteenth century a gradual improvement took
place. Many of the traditional abuses were done away with, and
the House of Commons, through its Public Accounts Committee,
paid increasing attention to irregularities in the administration
of public funds. But the system of obtaining supplies for the
Army was still unsatisfactory when the Crimean War broke out.
It was not till 1854 that the business of feeding and clothing the
troops was taken out of the hands of commanding officers and
centralized in a single supply department.

The loss of life and the sufferings caused by the breakdown in
the supply of food, clothing, and hospital stores in the Crimea
were proportionately not greater than in. many of the disastrous
expeditions during the war with France fifty years before. But
public opinion was now more easily aroused by the horrors to
which the private soldier was exposed. In the official report on
the Crimean scandals, published in 1855, the picture of muddle
and misery, which had been painted so‘ vividly by the famous war
correspondent Russell, was shown to be by no means exaggerated.
Apart from the breakdown of transport and the lack of proper
medical equipment, much of the food issued was uneatable,
and the boots and clothing were deficient in amount and inferior
in quality. The Report says that the clothing was ‘ extremely
spongy in its texture, badly put together, and quite unfit to stand
the tear and wear of the rough work of the trenches’. Of the
boots it says, ‘like all articles obtained by contract from the
lowest bidder, the workmanship was bad, and totally unfit for
endurance in the tenacious soil of the trenches, or for travelling
along the muddy roads, in which the men were often half-leg deep.’
A report of a Board of Officers which met at Sebastopol on
January 8, 1855, states that ‘two or three days’ wear on duty
and fatigues have rendered the boots useless, the heels and soles
becoming detached from the uppers ’.?

1 Treatise on the Administration and Organization of the British Army, pp. 55-60.
2 Report of the Commission of Inquiry into the Supplies of the Britssh Army in the
Crimea, 1855, p. 3.

12 ORIGINS OF CONTROL AT THE WAR OFFICE

Not only was there an absence of sanitary precautions, which
caused a severe outbreak of dysentery and cholera, but no atten-
tion was given to the need for a scientific dietary. During the first
year the troops were fed for the most part on biscuits and salt
meat, and there was a total lack of fresh vegetables. The attitude
of the Commissariat on this matter is illustrated by a story told
by Prince Albert to Lord Panmure, the Secretary of State for War,
in a letter dated February 10, 1855 :

It is admitted by allsmedical men that the greatest danger to our army
arises from scorbutic diseases and a corrupt state of blood, caused chiefly
by the use of salt provisions. Vegetables are of the utmost importance
to the poor men. It so happens that one of the Crimean Relief Societies
sent out a whole shipful of vegetables. On its arrival at Constantinople,
the man in charge of it reported himself to the Commissary (I believe
Smith, reported to be our best), who was delighted to hear of the arrival
of provisions; when he saw the list, however, and found they were
vegetables, he declined purchasing ‘as the Commissariat had no power
to purchase vegetables’!! You will know that such is the ordinary rule,

but surely in these moments they ought to have full powers to exercise
their own discretion.

Lord Panmure replied as follows :

The narrative with which Your Royal Highness has favoured me is
of a piece with the old-fashioned departmentalism throughout the whole
administration of military affairs, which must be entirely overset.!

The reforms that took place during and after the Crimean War
laid the foundation of the modern system of army administration.
At the present time when the standards of efficiency expected in
the public service are still apt to be higher than average human
nature can reach, it is worth emphasizing the rapid and unmis-
takable improvement which has taken place even in the last
fifty years. One has but to dip into the history of army adminis-
tration to realize that there has been a marked advance in the
integrity and efficiency of public servants and the honesty of army
contractors. What are the main reasons for this change ?

It has often been observed that honesty and fair dealing in
business have been encouraged by the development of banking
and the growth of the credit system. The causes that have con-
tributed to raise the standards of honour and efficiency in public

1 The Panmure Papers, vol. i, pp. 54-5.

ARMY SUPPLY IN PEACE AND WAR 13

administration are many and various. For one thing ideas of
economy have changed. It is now realized that it is more
economical to pay decent salaries to Government officials than to
leave them to obtain their livelihood by recognized or illicit fees
and perquisites. The principle of paying a living wage to all public
servants out of public funds has only been admitted in compara- |
tively recent times. Without this it was impossible to expect
efficient and honourable service or a high sense of public duty.

But another important factor contributing to the same end
has been the growth of democratic institutions and a democratic
public opinion. The abolition of sinecures and perquisites has
been accompanied by an increasingly critical and exacting
attitude on the part of the public and the Press towards the
conduct of public officials. This attitude, it is true, is sometimes
more concerned with the cutting down of expenditure as an end
itself, without regard to the value and efficiency of the service
performed ; but on the whole, especially in time of war, and on
matters in which public opinion is particularly interested, criticism
has acted as a spur to efficiency. The results of democracy are
particularly noticeable in the change which has taken place in the
treatment of the private soldier. He is no longer a common
vagabond, forced by destitution or the attentions of the press-
gang to exchange the frying-pan of peace for the fire of war. He
is a voter, with a share in the government of his country. Whether
he enlists as a volunteer or is conscripted by the will of the
majority, he must be treated as a citizen with full rights. The
heartless indifference of the Government and the ruling classes to
the sufferings of the common soldier during the Napoleonic wars
reflects a social system which first created rogues and vagabonds,
and then offered them service in the Army as the only possible
avenue of escape from a life of misery and persecution. The
elaborate care taken to safeguard the health and well-being
of the soldier during the Great War was due not merely to the
advance of medical science and improvements in the technique
of public administration, but to the extension of democracy and
public education and the higher standard of living which they
have rendered possible.

The Army Contracts Department of the War Office was

14 ORIGINS OF CONTROL AT THE WAR OFFICE

created during the Crimean War in consequence of the breakdown
of the previous system of obtaining supplies for the Army. It
was laid down that all stores required for the Army should be
purchased by the Contracts Department, and that the normal
method of making contracts should be by public competition.
After the South African War, the experience of which had shown
that the problem of an efficient and reliable supply system had
not yet been entirely solved, much attention was given to the
reorganization of the Purchasing Departments of the War Office.
The principle of centralizing purchases was confirmed by Sir Clinton
Dawkins’ Committee, which reported in 1901, but was discarded in
1904 on the recommendation of Lord Esher’s War Office (Recon-
stitution) Committee. In that year the Contracts Department
was abolished, and the military supply departments were autho-
rized to do their own buying direct. The new system did not,
however, last long. It resulted in competition in the same markets
between the different supply departments, and the absence of
a single purchasing authority led to other difficulties. The Army
Council therefore decided in 1907 to re-establish the post of
Director of Army Contracts. The main lines of organization then
laid down continued with slight alterations till the outbreak of
war.

The underlying principles of this organization were that the
buying for the whole Army should be centralized in the War
Office; that the military supply departments should determine
requirements, draw up specifications, and receive, store, and
inspect the goods ; and that the actual placing of contracts, the
selection of firms invited to tender, and negotiations as to price
should rest with the Army Contracts Department, which was
a civilian branch, responsible to the Financial Secretary. The
advantages of centralization of buying were obvious. But the
grounds for divorcing the functions of purchase and inspection
were less obvious. The main object was to provide a system of
checks and counter-checks, which would prevent any possibility
of financial laxity or costly errors of judgement. That the system
involved inevitable delays owing to the necessity of referring to
and fro between different offices, which were situated miles apart
in different parts of London, was not a serious defect in normal

ARMY SUPPLY IN PEACE AND WAR 15

times. Mistakes were less likely to occur if nothing could be done
in a hurry; and experience confirmed that several brains were
better than one in dealing with the wiles of Army contractors.
The system was thus a rather complicated division of labour
under which the Financial Member of the Army Council, who
was responsible to Parliament for the expenditure of public money,
looked after the question of price; and the Quartermaster-
General or the Master-General of the Ordnance, his colleagues on
the Army Council, decided what to buy and saw that the quality
was satisfactory.

In July 1914 the Army Contracts Department consisted of
fifty-six officials and clerks. It was_their business to keep lists of
reliable contractors ; to receive demands from the supply depart-
ments, and send out inquiries and forms of tender to selected
firms ; then to open the tenders received at the time appointed,
tabulate full particulars, and pass them on to the supply depart-
ments with their recommendations ; and finally to issue forms of
contract to be signed and returned by the successful firms. A staff
of not more than twenty was sufficient to handle in this manner
the business of purchasing munitions and explosives. The average
annual purchases of the Army in times of peace were between
five and six million pounds, the actual total for the two years
before the war being £11,370,000. About half this ‘amount
represented contracts placed by the Contracts Department of the
War Office, the balance being local purchases reviewed, but not
placed, by the Contracts Department. The resources of the
whole world were available to draw upon. Hundreds of firms
catered specially for Army requirements, and many thousands
could be counted on to compete eagerly for the privilege of selling
to the War Office and calling themselves Government Contractors.
Except for an occasional attempt at a ‘ring’, that is to say, an
understanding between tendering firms, competition could be
trusted to keep prices down to a reasonable level. The constant
pre-occupation of the Contracts Department was to watch for
evidence of rings and to take steps to break them up when
discovered by refusing to deal with the offenders. It was
a severe punishment for most firms to be struck off the War

Office list.

16 ORIGINS OF CONTROL AT THE WAR OFFICE

Equal care had been given to perfect the organization of the
military supply departments. Technical experts were employed
for drawing up specifications and inspecting deliveries. Scientific
methods of testing were in use. Estimates of requirements could
be gauged with great accuracy. With a strictly limited amount
of funds to draw upon, the military departments had to cut down
their expenditure to the minimum, purchase goods which would
last for a long time, and never keep more than a minimum of
reserve stocks on grounds of economy and for fear of loss by
deterioration. At Woolwich, Pimlico, and elsewhere the military
departments had their own Army factories, where uniforms,
guns, and ammunition were manufactured, special processes
tested, and comparisons made with the quality and cost of
privately manufactured goods. An extension of direct manu-
facture by the State might perhaps have been justified both on
grounds of efficiency and economy, but this development had
been abandoned on grounds of policy. A Committee on the
Organization and Administration of the Manufacturing Depart-
ments of the Army appointed in 1887, under the chairmanship
of the Earl of Morley, reported that they looked upon the success
of the Army factories with some apprehension. They found that
the State factories were well-equipped and economically managed,
but they noticed a tendency for their activities to be expanded
unduly at the expense of private manufacturers. ‘The natural
tendency for able administrators is to develop the works of which
they have charge to the fullest possible extent.’! This tendency
they seem to have regarded as a menace to the private armament
industry, the prosperity of which was vital to the defence of the
country. As a result of this point of view the Army factories only
produced about a third of the guns and ammunition and half the
uniforms required, but their existence provided a useful check on
private manufacturers. The fraudulent contractor was easily
caught ; his only chance to avoid detection was by bribery, but
under the elaborate system of checks which prevailed suc-
cessful bribery was rare and attempts were soon detected and
punished.

* Report of the Committee on the Organization and Administration of the Manufacturing
Departments of the Army, 1887, C. 5116.

ARMY SUPPLY IN PEACE AND WAR 17

Under the conditions obtaining in times of peace, the system
so organized worked smoothly and efficiently. Within the limits
imposed by the strictest economy, it gave the Army all that it
required. It delivered the goods at the right time and in the
right place, sound and durable in quality, and at the cheapest
possible price. Unquestionably the War Office machinery was
adequate for the needs of peace. What would happen if a
European war should break out, no one could prophesy.

1569.53 c

CHAPTER II
THE OUTBREAK OF WAR

Normal routine continued — Appeal for 500,000 volunteers — Centralized
buying breaks down — Story of jerseys bought by local commands — Paralysis
at head-quarters — Purchases by Allied Governments — Commission Inter-
nationale de Ravitaillement — Unemployed harness-makers and Army saddles —
Lord Kitchener’s intervention — Proposals for reorganization of Army buying —
Necessity for organizing industry first realized November 1914 — Reluctance
to interfere with private enterprise — Nationalization of armament firms
rejected — Ministry of Munitions established May 1915 — Provision of food,
clothing, and miscellaneous equipment remains with Army Contracts Depart-
ment — Origins of State control in the War Office.

Wuen war broke out there were no sudden changes. The
normal routine continued as if war were to make little difference.
When the Expeditionary Force had crossed to France, additional
orders were placed, and appeals for special urgency began to
interfere with the smooth flow of business. Then the decision to
raise an army of a hundred thousand men brought orders on an
unprecedented scale. The work of the Contracts Department
began to grow congested and the staff became overburdened.
A few weeks later it was announced that Lord Kitchener had
decided to appeal for a further five hundred thousand men. To
equip such a force seemed beyond the range of possibility ; but
the same system continued, the same number of officials and
clerks endeavoured to cope with the ever-growing mass of arrears,
and larger and larger demands were made upon the firms on the
War Office list. Long before even the most necessary supplies
were ready, recruits began to pour in to the improvised camps in
their tens of thousands. The system of centralized buying broke
down ; local commands bought where they could at any price ;
recruits were told to bring their own blankets and toilet neces-
saries to make good the deficiencies of the official supply.
Pneumonia broke out in many camps and was attributed to the
lack of proper equipment. The competition of local commands,
of privately raised battalions, of Territorial Force Associations,

THE OUTBREAK OF WAR 19

of the Allied Armies, and of the supply departments and Contracts
Department of the War Office produced a wild scramble, which
sent prices up by leaps and bounds.

The following story is well authenticated: A consignment of
jerseys was bought by a firm of merchants at 3s. 11d. each and
offered to the War Office at 4s. 5d. The offer was refused because
the price was too high, whereupon the goods were sold to a pro-
vincial draper at 4s. 1ld. The draper then sold a considerable
quantity to various local commands at 5s. 10d. ; and the balance
went to a firm of Army contractors at 5s. 9d., who resold them to
a Territorial Force Association for 6s. 6d.

The buying machinery at head-quarters, which was functioning
smoothly when war broke out, was now becoming paralysed. No
preparations had been made for such a strain as this. The very
merits of the system—the elaborate checks, the careful division
of labour, the strict adherence to rules and precedents, and the
. constant reference from one officer to another for concurrence,
observations, or covering authority—all these tended to stifle
initiative and clog the wheels of the machine. There were plans
in the War Office for dealing with an outbreak of war; but no
plans for war on such a scale as this. For weeks and months few
even in the War Office realized the extent of the struggle on which
the country had embarked. Even to the General Staff it would
have seemed incredible at that time that Great Britain would
have to raise more than five million men before the War ended.
Certainly no one in the Contracts Department could have been
expected to plan on such an assumption.

In October 1914 a crisis was reached. The situation had for
some time been complicated by the competition of Allied Govern-
ments, whose needs were no less urgent than those of the British
Forces ; indeed, the importance of equipping the Allied Armies
which were already fighting at the front was even greater than that
of supplying the recruits of Kitchener’s Army. Early in August
a body called the Commission Internationale de Ravitaillement
had been set up as the result of an agreement between the French
and British Governments.1_ Its purpose was to enable the pur-
chasing officers of the French Government to have access to the

1 Appendix 1.
C2

20 ORIGINS OF CONTROL AT THE WAR OFFICE

information as to firms and markets in the possession of the
Contracts Departments of the War Office and Admiralty, and to
secure that, where the requirements of the two Governments were
likely to clash, competition should so far as possible be avoided.
At later dates representatives of other Allies joined the Com-
mission. The administrative and secretarial work of the Com-
mission was entrusted to the Exhibitions Branch of the Board of
Trade, whose officials assisted the Allied buyers in finding sources
of supply and negotiating with British firms. Before orders
could be placed by the Allies, the Board of Trade officials had to
obtain the consent of the War Office and Admiralty. But in
spite of this check the Allies had been remarkably successful in
obtaining supplies. Effective methods had been rapidly im-
provised to meet the emergency ; there were no precedents and
no established routines to stand in the way. Indeed, many
manufacturers found it simpler to do business with the Allies
through the Board of Trade than with the War Office; there
were fewer formalities and there was more reasonable latitude as
to quality and specification.

A concrete example will illustrate the difference. One of the
most urgent needs of: the Allies was for saddlery and harness.
The War Office refused to give its consent to any purchases of
saddlery on the ground that the whole output of the country
was being taken for the British Army. The Board of Trade then
asked for a list of all the manufacturers of saddlery on the War
Office list, and inquired if orders might be placed with any firms
which did not appear on the list. To this the War Office raised
no objection. Within a short time the Allies were obtaining their
saddles, while deliveries for the British Army remained unsatis-
factory. The reasons were twofold. The Board of Trade had
managed to tap new sources of supply; and the Allied repre-
sentatives were not bound by the rigid specifications laid down
by the War Office. Unemployed harness-makers were found in
Birmingham and Walsall who had probably never seen an Army
saddle, and would never have dreamt of tendering to the War
Office. When it was explained to them what was wanted, they
set to work on a simplified pattern and produced large quantities
which satisfied the urgent needs of the Allies.

THE OUTBREAK OF WAR | 21

When Lord Kitchener discovered that the Allies were getting
what they wanted, while the Army was still wofully short, he
took the characteristic step of commandeering the services of
Mr. U. F. Wintour, C.B., C.M.G., the Board of Trade official who
was buying for them, and appointing him to the post of Director
of Army Contracts.

In November 1914 the new Director of Army Contracts pre-
sented a report to the Army Council containing proposals for the
re-organization of the purchasing system. The difficulties were
of two classes, internal and external, and each reacted on the
other. The internal difficulties, caused by the necessity of adjust-
ing the existing administrative machinery to new conditions, were
gradually remedied during the war; they are only mentioned
here because of their bearing on the external problem and the
particular forms of State control adopted by the War Office.

The weaknesses of the existing system were attributed to the
division of responsibility for purchase between two different
departments, one being responsible for considering the price and
the other for deciding the quality. Inevitably under war conditions
this line of demarcation was constantly being overstepped. When-
ever demands were exceptionally urgent, the military departments
were tempted to usurp the functions of the Contracts Department
and place orders direct. The necessity of accepting substitutes
for the standard official patterns also caused great confusion.
The Contracts Department was supposed to find out what sources
of supply were available, and to know the productive capacity
of the country. The military departments, on the other hand,
were the sole judge of quality, and were reluctant to modify the
rigid specifications to which they were accustomed. The result
was that there was no single authority to balance the comparative
importance of speed and quantity on the one hand and excellence
of quality on the other. With two departments dealing with
separate halves of the problem, it was nobody’s business to
survey the problem as a whole.

The solution proposed was to combine the two halves and set
up a single authority responsible for the whole business of pro-
viding stores for the Army. This department would determine
questions of quality and price, inspect samples and place con-

22 ORIGINS OF CONTROL AT THE WAR OFFICE

tracts, watch the execution of orders, hasten deliveries in arrears,
and assist manufacturers in every possible way. In many branches
of industry the ordinary resources of the country were insufficient
to produce all that was required ; and if the new armies were to
be equipped in time, the co-operation of every available manu-
facturer would be required. In such circumstances it was useless
to attempt to adhere rigidly to standard patterns drawn up to
suit peace-time conditions. Attention would have to be given to
such considerations as the comparative speed at which articles of
slightly different type could be produced, the available supplies
of raw material, and the most fruitful use of labour and machinery.
The buying department would have to be in the closest possible
touch with industry, studying the possibilities of home and foreign
sources of supply, and intervening where necessary to secure the
maximum production for military purposes.

The argument was summed up in the following words, the
truth of which was not fully realized for many months: ‘ The
important part played by industry in fitting out an army has not
been sufficiently recognized. The war is a war of organization,
in which the raisig of men is one very important item. It is
equally important that they should be equipped, clothed, fed,
and provided with guns, arms, and ammunition. For the pro-
vision of these necessaries, industry, and industry alone, has to
be relied upon, and the rapidity and effectiveness with which
industry can be organized to meet the emergency cannot but have
an enormous influence upon the issue of the struggle.’

Even in the sphere of guns and ammunition, where the need
was greatest, six months elapsed before effective steps were taken
to give effect to this policy by the establishment in May 1915 of
the Ministry of Munitions. The idea that industry would have
to be deliberately organized for war production encountered
subconscious resistance in a Government committed to the doc-
trines of free trade and individualism. It is not surprising that
the necessity for State intervention was only gradually admitted
by Ministers who had spent the greater part of their political
careers in exploding the fallacies of Protectionism on the one hand
and Socialism on the other.

But more important even than the traditional bias of a

THE OUTBREAK OF WAR 23

liberal Ministry was the conservative professional outlook of the
soldiers. The military departments of the War Office relied on
private enterprise to perform its job of finding supplies in war, as
implicitly as they did in times of peace. It was naturally felt that
it was not the business of soldiers to meddle with industry.
Though many of them were technical experts in engineering, they
had little theoretical or practical knowledge of the organization
of industry, of labour conditions, or of economic statistics. It
was not surprising, therefore, that they under-estimated the diffi-
culties with which the regular War Office contractor would be
faced in meeting the demands made upon them, and the slowness
with which the economic system would adjust itself unaided to
the colossal task of transformation from peace to war conditions.

In October 1914 a proposal was made in the War Office that
the Government should take over the large armament firms and
transform them from private commercial ventures into a branch
of the public service; but this suggestion received no serious
consideration. It was thought preferable to rely on private
enterprise and the laws of supply and demand. The result was
that for the first year of the war firms able to supply munitions
had to struggle against herculean difficulties, and the fact that
they were able to obtain any price they chose to ask was an
extravagant and probably unnecessary stimulus. The doctrine
implicitly acted upon was that the higher the price and the greater
the freedom allowed to the private contractor, the greater would
be the increase in the supply ; it followed that if only the Govern-
ment paid high enough prices and left private firms to their own
devices, munitions would be forthcoming in abundance.

After nearly a year’s trial, this theory was abandoned. The
problem of munitions supply was tackled in a different way.
National organization and centralized control were found to be
more effective than high prices and laisser-faire in stimulating
supply. National factories were built; raw materials were
monopolized and distributed by the Government at fixed prices ;
and manufacturers, instead of being left to produce shells or not
as they pleased and to ask any price they liked, were, if necessary,
required to produce them at prices based on cost, and instructed
how to do it.

24 ORIGINS OF CONTROL AT THE WAR OFFICE

The methods of State control adopted by the Ministry of
Munitions fall outside the scope of this volume. The Ministry
covered an immense range of trades and industries; its total
expenditure from June 1915 to March 1919 was close on
£2,000,000,000 ; and in place of the twenty clerks in the Army
Contracts Department who sufficed to purchase munitions in
August 1914, it employed in November 1918 a staff of 65,142
persons. But in spite of its vast responsibilities, it covered
only a part of the Army’s requirements. The principal items
covered by the Ministry were arms, ammunition, mechanical
transport, optical instruments, and aeronautical supplies. The
Army Contracts Department remained responsible for the pro-
vision of most other supplies and equipments. These included
food of every kind for the soldier’s daily ration; a complete
outfit of clothing, including underwear, hosiery, shirts, uniforms,
boots, great-coats, accoutrements, pack, blankets, ground-sheets ;
huts, tents, engineers’ stores, and miscellaneous camp equipment ;
timber, barbed wire, picks and shovels, sandbags, rubber boots,
and smoke helmets for use in the trenches; stretchers, drugs,
medicines, and hospital stores for the Army Medical Corps ;
forage, horse-shoes, harness and saddlery for the mounted troops ;
petrol, fuel, and light; and innumerable other items of less
importance. The exact line of demarcation was not always easy
to define. But, broadly speaking, the division followed that
between the two great military supply departments of the Army.
The Master-General of the Ordnance obtained most of his supplies
through the Ministry of Munitions; the Quartermaster-General
through the Army Contracts Department. Another broad dis-
tinction was that the Ministry dealt with the engineering and
metal industries ; the War Office, though it bought a large amount
of hardware and tools, dealt primarily with the food trades and
the textile and leather industries. With the exception of a com-
paratively few items, the supplies purchased by the War Office
were within the productive capacity of the country, but were
drawn from the same sources of supply as the necessaries of life
for the civilian population. The Ministry’s demands on the other
hand far exceeded the original capacity of production, but were
not for the most part of a kind for which there was a large and

THE OUTBREAK OF WAR 25

indispensable civilian demand. This difference had an important
bearing on the development of State control in the two depart-
ments.

The evolution of control, like the evolution of natural species,
had many starting-points and many parallel lines of descent. The
chief significance of the early experiments at the War Office is
that they led ultimately to control of the necessaries of life for
the civilian population. By requisitioning practically the whole
output of the engineering industry and making use of nearly all
the iron and steel obtainable, the Ministry of Munitions virtually
suppressed private trade and ignored civilian needs. In the textile
industries and food trades the War Office could not do this ;
civilian requirements had to be-met. This led to the Standard
Clothing and War-time Boots schemes on the one hand, and to
the establishment of the Ministry of Food on the other. The
machinery of control necessarily became more elaborate when
it was concerned with the needs of private consumers. But the
experience of the War Office in feeding and clothing five
million men in the Army provided a useful preparation for the
task of feeding and clothin, the thirty-five million who remained
at home. The starting-point of the evolution traced in this book
is the struggle of the Army Contracts Department to secure
supplies for the Army and to protect the Government from
extortionate charges ; the final stage is reached in a national and
international organization to secure supplies at reasonable prices
for the whole nation.

CHAPTER III

FROM COMPETITIVE TENDERING TO COLLECTIVE
BARGAINING

Speculation in Army supplies — Delays inherent in tendering system —
Public criticism of high prices paid — Comparison with business methods —
Establishing personal contact — Widening area of supply — Work of the
Labour Exchanges — The laws of supply and demand and ‘ business as usual ? —
Effect on prices of raw and subsidiary materials — Weakness of competitive
tendering — New policy of collective negotiations — Agreement with Whole-
sale Clothiers’ Association — Objections to the ‘ flat rate’ principle — Advan-
tages of new system — Difficulties still unsolved.

Tue story of the jerseys which cost 3s. 1ld., were offered to
and refused by the War Office at 4s. 5d., and were ultimately
sold to local Army buyers at 5s. 10d. and 6s. 6d., has been given
as a typical illustration of what happened towards the end of
1914. This was by no means an isolated or exceptional case ;
it happens to be well authenticated, because a friendly critic of
the War Office took the trouble to trace the facts from beginning
to end. In every item of Army clothing the same feverish buying
and selling went on. Army socks became a favourite gambling
counter in the city; speculators turned with relief from the
slump in rubber shares to the boom in Army contracts. ‘Some-
body brought off something like a corner in blankets ; for a few
days the market was bare. No risk attached to such transactions ;
they were perfectly sound business propositions. Any one who
could offer supplies could name his own price; and in order to
get a contract, it was not always necessary even to possess the
goods. An option was sufficient. The banks were quite willing
to advance money on a War Office contract and thus enable the
contractor to buy what he had already sold.

The Army Contracts Department tried to put a stop to this
speculation. One of its rules in normal times was to deal direct
with manufacturers and never to buy from merchants and middle-
men. Endeavours were made to maintain this principle. But

COMPETITIVE TENDERING 27

when the middlemen could offer delivery from stock, and the
goods were required immediately, the Department had no alter-
native; it could not afford to wait for the goods to be manu-
factured. The result was that merchants were encouraged to
anticipate Army requirements, and place orders with manufacturers
before they had sold their output to the War Office. The merchant
could buy quickly ; as soon as he knew what the War Office
wanted, he could fix up a contract in a few hours. The War
Office, on the other hand, took days and sometimes weeks to make
up its mind. The regular routine was too slow and deliberate
to keep pace with the feverish activities of the speculators.
Attempts were made to speed up the work of dealing with
tenders; long hours of overtime were worked, fresh staff was
engaged, and when the strain and congestion grew too great,
additional accommodation was obtained outside the War Office.
But a limit was soon reached beyond which it was found im-
possible to reduce the interval between the receipt and the
acceptance of offers. Under the tendering system as many as
two or three hundred different offers would be received at the
same hour, and all had to be considered together. Before the
final allocation could be made, papers would be referred back-
wards and forwards between four different offices, in separate
buildings. The Chief Inspector and the Chief Ordnance Officer
in different offices at Woolwich and Pimlico, the Quartermaster-
General’s representative in Whitehall, and the Contracts Officer
in Tothill Street—all had to be consulted and make their reports,
recommendations, and observations. On completion of their
outward journey, the papers retraced their steps by the way they
had come. Frequently the only action required was a formal
concurrence, but this could not be dispensed with except in rare
cases. The moving of the papers backwards and forwards usually
took a fortnight or three weeks ; sometimes the journey had to be
repeated for consideration of further points that had arisen or for
reports on additional samples received too late for the first journey.
In a complicated tendering, where samples had to be seen by two
different inspecting officers, or where a number of trade patterns
differing from the official pattern had to be considered, the time
taken before all the orders were placed might run into five or six

28 ORIGINS OF CONTROL AT THE WAR OFFICE

weeks, even if every effort was made to expedite the case, and
no delays occurred through mislaying of documents or a breakdown
of the messenger service.

The result of this delay was that higher prices had to be paid.
Manufacturers would make it a practice of quoting ‘ subject to
immediate acceptance’; in a few days they would withdraw
their previous offer, having perhaps in the meantime sold their
goods to a merchant, or they would quote a higher price on the
ground that their option on the raw material had expired. It
often happened, too, that firms would be asked to tender a second
time before they had heard whether their original offer had been
accepted. This placed them in a position of uncertainty, against
which they would naturally protect themselves by advancing the
price. Another grievance of contractors was the long time they
had to wait for payment. This again was due to the impossibility
of speeding up the existing machinery beyond a certain point.
Delays were inevitable and inherent in the system. The regula-
tions were designed to prevent possible accidents, not to encourage
the maximum speed—like the old law which required motor
vehicles to be preceded by a man on foot carrying a red flag.

During this period there was much criticism in the Press and
in Parliament of the exorbitant prices paid by the War Office and
of the speculation and profiteering associated with Army contracts.
The Financial Secretary of the War Office, replying to these
criticisms in the House of Commons on November 23, 1914,
expressed the general view when he said: ‘ Everybody, I think,
will agree that a Government Department, not merely the War
Office, but any Government Department, has often to pay more
than a private individual.’1 But few of the criticisms pointed to
any solution of the real difficulties. Most of the critics were
content with the suggestion that the Government should buy like
a private business firm. But how would a private business firm
do it? That was the problem Many business men were at the
time advising the Director of Army Contracts, but they did not
profess that the solution was easy. The annual purchases of the
largest London stores did not amount to a hundredth part of the
annual requirements of the War Office. During the first two and

1 Parl. Debates, H. of C., vol. Ixviii, col. 851.

COMPETITIVE TENDERING 29

a half years of war the aggregate value of purchases made by the
Army Contracts Department amounted to more than £700,000,000.
The largest London stores bought a small fraction of the national
output ; the War Office wanted many articles in greater quantities
and at a quicker rate than industry could produce them. A private
firm would choose its own market and its own time for buying ;
the War Office had to buy wherever it could and buy at once.
Though a private firm had to buy to suit its customers, it could
exercise a wide latitude in selecting the relatively cheapest goods ;
the Army demanded the best obtainable, insisted on a rigid
specification, and had no use for substitutes.

In spite of these difficulties many attempts were made, and
much was actually done, to introduce more business-like methods,
to break away from the established routine, and generally to
speed up the machine. Innovations were made here and there.
Expert buyers were appointed ; personal negotiations began to
take the place of formal tenderings; prices would be knocked
down by bargaining and informal pressure. Manufacturers began
to respond to the human appeal, and would quote lower prices as
a personal favour or from a sense of patriotism. The Department
began to drop the traditional attitude of aloofness and distrust,
and to discard the secrecy with which the needs of the Army
were usually guarded. Contractors who could be trusted were
taken into confidence and told the full gravity of the position ;
this generally proved to be a sure method of obtaining their
co-operation.

Towards the end of 1914 energetic steps were also taken to
widen the area of supply and induce as many firms as possible
to tender for Army contracts. In peace-time the War Office list
contained a limited number of specially selected firms; most
firms regarded it as a privilege to be on the list, but many im-
portant firms did not bother to get recognized as regular tenderers,
because they found War Office business either too troublesome
or perhaps not remunerative enough ; to do well as Army con-
tractors, a firm had to specialize to some extent, or at least to be
familiar with War Office specifications. This policy of exclusive-
ness had inconvenient results when demands became so large that
the ordinary sources of supply dried up. The War Office had no

30 ORIGINS OF CONTROL AT THE WAR OFFICE

means of knowing the full extent of the manufacturing resources
of the country in many of the items of Army equipment, and with
the insistence still laid on peace-time specifications, it was some-
times doubted whether the experiment of trying new firms would
be justified. This attitude had to be abandoned. In one item
after another, every possible producer had to be enlisted and
induced to tender. But here a difficulty arose. To find out all the
possible firms capable of making each of the hundreds of different
items which were in short supply, from horseshoes to razor blades,
and from tents to brass buttons, would have required a large staff
of travellers and inspectors. For a mere name was not sufficient.
It was necessary to know, first, whether the firm really existed
and had any plant, or was a mere blind for a firm of speculators ;
and secondly, whether it could really produce the article, and if
so in what quantities. If it had had no experience, it had to be
shown how to set about it. And lastly, many firms who had never
thought of tendering had to be induced to try their hand; and
it took some time to find such firms.

In all this work, the Contracts Department relied to a large
extent on the assistance of the Employment Department of the
Ministry of Labour and its exchanges. About 11,000 firms were
inspected and reported upon by Labour Exchange officers during
the first eighteen months of the war. Of this total several hundreds
proved to be merely middlemen or agents. Early in the war
a survey of the woollen and worsted industries was carried out at
short notice by the Labour Exchanges in Yorkshire with a view
to showing the possible expansion of khaki cloth manufacture.
Similar inquiries were made later in the tailoring and shirt trades.
Small saddlery firms were induced to group themselves together
for War Office contracts. Efforts were successfully made to
merease the output of biscuits, cork helmets, rum jars, climbing
irons, field telephones, hosiery, buttons, glass bottles, scissors,
mess tins, nail boxes, stove pumps, grindstones, and many other
of the thousand and one miscellaneous items of Army equip-
ment. This work not only helped the War Office by increasing
production, but at the same time relieved unemployment and
helped the Labour Exchanges to find work for applicants on
their lists.

COMPETITIVE TENDERING 31

All this was useful as a beginning, but in the main the essential
problem remained unsolved. Lord Rhondda, shortly before his
death, stated that his object at the Ministry of Food had been to
endeavour to ‘suspend the laws of supply and demand’. It is
doubtful whether the problem would have been formulated in this
way in 1914; but substantially that was the miracle which both
the War Office and its critics hoped might somehow be accom-
plished. If supply was limited and demand practically unlimited,
market prices were bound to rise indefinitely. And if prices of
materials required for the Army were certain to rise, everybody
who wanted to make money would start dealing in them;
profiteering in Army supplies would become the chief national
industry. Nor was it merely the-finished article which attracted
the speculator; the profits to-be made in raw materials and
semi-manufactured articles such as wool and yarn were quite as
sensational; and since these were required for many other
purposes besides Army requirements, there could be no objection
on patriotic grounds to a course which was merely regarded as
* business as usual ’.

When purchases from stock had ceased to be necessary, and
the War Office was able to deal direct with manufacturers, the
question of raw and subsidiary materials began to attract special
attention. What happened under the tendering system was that
fifty or more manufacturers would enter the market at the same
time, and each would endeavour to cover himself for the quantity
of material he required in order to tender. If, for example, the
inquiry was for 200,000 blankets, and fifty firms were invited to
tender, each firm might buy, or obtain an option to buy, enough
yarn to manufacture the whole quantity. In this way the effect
of the original demand would be multiplied fiftyfold in the yarn
market, and so on, in something like geometrical progression, in
the markets for tops and raw wool. A constant succession of
these vast orders, coming upon a trade which had at the same time
a large demand for export and for home consumption, demoralized
the market. Dealing ceased to be a matter of careful estimates
of chances, and began to resemble an infallible system for breaking
the bank. The only effective limit to the profits obtainable was
the amount of money a man could borrow to finance his trans-

32 ORIGINS OF CONTROL AT THE WAR OFFICE

actions. It was authoritatively stated at the time that a complete
stranger to the wool trade, with next to no capital, made £150,000
in six months by speculation in yarn.

Until the end of 1914 little attention could be given to the
solution of these remoter problems. The whole energies of the
Department were devoted to the task of obtaining sufficient sup-
plies, and as soon as deliveries began to keep pace with current
requirements, to the re-establishment of centralized buying for the
whole Army. Until local buying had been stopped, it was no use
trying to deal systematically with prices; and until head-
quarters was in a position to supply what was needed, it was
impossible to stop local buying. But in the last two months of
the year important steps were taken towards the replacement of
competitive tendering and individual offers by a simpler and more
rational procedure. |

Hitherto associations of traders had been looked upon with
great suspicion. Co-operation for any purpose was apt to en-
courage understandings as to price, if not actual collusion in
tendering. But in the present emergency it was recognized that
co-operation might be a good thing if it led to better organization,
and understandings as to price might be useful if the object was
to keep them steady. Conferences were therefore arranged with
the executive officials of the Wholesale Clothiers’ Association.
The difficulties of the War Office and the full extent of its re-
quirements were frankly placed before them, and a strong appeal
was made to their patriotism to co-operate with the Department
in obtaining these supplies at reasonable prices. The response
was satisfactory. The manufacturers themselves were dissatisfied
with the confusion and uncertainty entailed in the tendering
system, and promised that if the War Office mended its ways and
abandoned competitive tendering, they would secure by collective
agreement and by concerted organization of production, that the
supplies should be forthcoming at prices considerably lower than
open competition would determine.

An agreement was thereupon made with the Wholesale
Clothiers’ Association for the supply of uniforms at an all-round
flat rate for making up—so much for jackets, so much for trousers,
and so much for great-coats. The War Office was to continue as

COMPETITIVE TENDERING 33

hitherto to supply the cloth at fixed ‘ issue ’ prices. It was realized
in the course of negotiations that to arrange a flat rate for every
class of manufacturer, large and small, efficient and inefficient,
would mean that the large firm would get a bigger profit than the
small one. But if the maximum output was to be obtained, any
flat rate must enable the small marginal producer to pay his way.
It was urged that the efficient firm was entitled to reap the benefit
of its superior organization, and that it would be unfair to penalize
him by paying him a lower price than the less efficient. To do so
would, in fact, place a premium on inefficiency. Moreover, even
the most efficient manufacturer would receive a lower price under
this arrangement than he would be able to obtain under conditions
of open competition. There was no question, therefore, that in
the particular circumstances of an overwhelming demand and
a limited supply, the arrangement was to the advantage of the
War Office, and involved a considerable concession on the part
of manufacturers. At a later date, when the machinery of the
wholesale clothing industry had been greatly expanded and the
War Office requirements had become more moderate, competitive
tendering was restored, and the keen competition that resulted
brought profits down to a much lower level.

Towards the end of 1914 the Association circularized its
members and induced them by voluntary arrangement to put
aside private orders and to concentrate all their energies upon
increasing the production of Army supplies. In place of a con-
tinuous succession of piece-meal demands and individual tenders,
the Association arranged the splitting up of the total requirements
of the War Office for several months ahead among all their
members. The chaos and confusion inseparable from the previous
system came to an end; speculators and middlemen were elimi-
nated; and the wholesale clothing industry settled down in
a systematic way to the business of producing the vast quantities
of uniforms required for equipping the New Army.

From this new departure four principles emerged which mark
the first stage towards national organization and control under
the War Office :

(1) Abandonment of the system of competitive tendering.

(2) Recognition and co-operation of Trade Associations.

1569.53 D

34 ORIGINS OF CONTROL AT THE WAR OFFICE

(3) Introduction of collective agreements covering the whole
of a trade.

(4) Substitution of a general uniform price over a period of
time for a multiplicity of individual contracts at different
prices.

The adoption of the new system represented a considerable
advance, but it only touched the fringe of the problem. In many
trades there were no manufacturers’ associations with whom it was
possible to conclude voluntary collective agreements. Secondly,
the prices fixed by collective agreement still depended upon
bargaining, in which the dice were necessarily loaded against the
purchasing department ; for the department could only guess at
the cost of production while the manufacturers more or less knew
them. Thirdly, agreements with manufacturers of the finished
article had very little influence on the market for subsidiary
materials, such as yarn and leather, and the raw materials wool
and hides. And lastly, the principle of arranging uniform prices
for the whole of an industry had no legal sanction behind it, and
was liable to be upset by recalcitrant firms standing out for
higher prices. The next developments, which consisted in the use
of the power of requisitioning and the earliest attempt to introduce
the costings system, will be described in the following chapter.

CHAPTER IV

REQUISITIONING AND COSTING IN THE JUTE
INDUSTRY

Jute production and consumption — Importance for military purposes —
Demand for sandbags — Course of prices up to March 1915 — Decision to
requisition — Stocks «at Liverpool — Negotiations at Dundee — Cost and
market price — Profits of spinners — The Costings system first suggested —
Objections to the plan — Appointment of agent firm — Increased output and
deliveries — The plan in operation — Comparison of Government price and
market price — Negotiations with Calcutta — Prices and quantities — An
avalanche of sandbags — Economies affected.

JUTE is a vegetable fibre used for the manufacture of sacks,
twine, packing-cloth, and coarse canvas. Jute fabrics are as
essential to wholesale commerce as paper is to a shopkeeper ;
they are in universal and daily use throughout the world for
wrapping and containing all kinds of produce.

The fibre is a monopoly of British India, its cultivation being
confined to the provinces of Bengal and Eastern Bengal, and the
Native States of Assam, Cooch Behar, and Nepaul. The area
under jute is normally rather more than three million acres,
yielding an average crop of ten million bales of 400 lb. each.
Before the war one bale cost about £5. Of the total production
British India consumed more than half and the British Empire
about two-thirds.1

1 The maximum consuming capacity of the jute spinning and weaving industry of
the world in 1913 was approximately as follows :

bales

British India : : 6 - 5,250,000
Great Britain : . F . 1,470,000
Germany . ; ‘ a : 886,000
United States : : F , 650,000
France. é : i . ‘. 593,000
Austria-Hungary . : : 4 366,000
Russia : : 5 : ; 274,000
Italy . : A ‘ 5 - 255,000
Spain . ; é i ‘ : 208,000
Belgium 2 : ; : : 152,000
South America ; ; ; ; 92,000
Holland ; : 5 ‘ : 40,000
Sweden ; ; : : : 36,000
Norway : : : c : 10,000
Greece A : é 3 : 5,000

Total . : : : - 10,287,000

36 ORIGINS OF CONTROL AT THE WAR OFFICE

The jute mills of Great Britain and India are concentrated in
two cities, Dundee and Calcutta, the former specializing in the
finer class of goods, and the latter producing the cheaper and
coarser qualities. This concentration of production and manu-
facture, and the comparative simplicity of the processes involved,
made the jute industry specially suitable for the first experiment
in control. Its great importance for military purposes for the
Allies as well as for the British Army soon made the experiment
inevitable. Since the jute industry was the first instance in which
the War Office succeeded in ‘ suspending the laws of supply and
demand ’ and obtaining its requirements at less than market prices,
the early developments will be traced in some detail.

Jute products were required for the Army for a number of
miscellaneous uses, but the most important item was sandbags
for use in building trenches, earthworks, and dug-outs. Until
early in 1915 the supply of sandbags was at the rate of about
60,000 per week. But when the campaign developed into
stationary trench warfare, the demand for sandbags enormously
increased. In March 1915 an urgent demand was received from
the front for an immediate supply of five million bags. In May
the demand was for six million per month, in July for twelve
million, and in August for eighteen million. Even this proved
insufficient. Every time new trenches were made hundreds of.
thousands of sacks were wanted ; empty sandbags were made to
serve every kind of purpose from pillows to nose-bags. In August
the Army announced that it would require thirty-five million for
September, thirty-eight million each in October and November,
and forty million in December. At the same time the demands of
all the Allies had increased proportionately. At the end of the
war the total number of sandbags supplied to the British and
Allied Armies had reached the gigantic total of 1,186,000,000.

The course of prices in the jute industry during 1914, 1915,
and 1916 is given in the diagram on page 451. The average
price of raw jute from July 1913 to June 1914 was about £32 per
ton. The high prices ruling in the early part of 1914 stimulated
the sowing of a larger acreage than usual, with the result that the
crop yielded was about five per cent. greater than the normal
yield. This fact caused a gradual fall in prices in June and July

COSTING IN THE JUTE INDUSTRY PSE

1914 from £33 to £30 per ton. On the outbreak of war a slump
occurred owing to the collapse of the exchanges and the cessation
of demand from Germany and Austria. The lowest point was
reached at the end of November 1914, when jute could be bought
at £12 to £14 a ton, and 103 0z. hessian cloth at 21d. a yard
compared with 33d. in November 1913. Trade then began to
revive. A vigorous demand from abroad sprang up, especially
from European neutrals. The War Office began to invite com-
petitive tenders for large supplies of jute products for the Army.
The outlook for the future looked promising. By the beginning
of March raw jute had recovered by 50 per cent. to £21 per ton,
and yarn and cloth had returned to their pre-war level. That
was the position when the demand for five million sandbags was
received.

In view of the urgency of the demand telegraphic inquiries
were sent to every firm on the War Office list, and Chambers of
Commerce in all important centres were asked to make the
requirements known as widely as possible. Offers began to pour
in subject to immediate acceptance ; but the number offered was
in most cases insignificant, the specification unsatisfactory, and
the prices too high. Then an incident occurred which roused
the War Office to drastic action. The largest firm of second-hand
bag merchants telegraphed an offer to supply the whole quantity
and more at a price about three times the highest hitherto paid.
No conditions as to delivery were stated. Obviously the firm
could not hold such a large amount at the time, but counted on
being able to buy what was wanted at prices which would yield
a satisfactory profit. If only they could keep the War Office off
the market by contracting to supply its full requirements, there
was no reason why the price should rise above their quotation.
At the prices then ruling their quotation would allow a profit of
more than 100 per cent., which seemed a safe enough bargain.
But the offer was rejected. The War Office refused to swallow
the bait, and decided that something drastic must be done.

In March 1915 there were no powers under the Defence of the
Realm Act which enabled the Government to take possession of
anything it might require. But there was an old clause in the
annual Army Act which conferred the power of requisitioning

388 ORIGINS OF CONTROL AT THE WAR OFFICE

horses and vehicles, and this had recently been amended so as
to cover warlike stores in general. The procedure was compli-
cated. A statement had to be signed by a General Officer Com-
manding certifying that one of His Majesty’s Principal Secretaries
of State had declared that a ‘state of emergency’ existed. This
had to be presented to a Justice of the Peace, who signed a second
form instructing the Chief Constable and his subordinates to
render all assistance to the military authorities and to serve
requisitions on the owners of the goods required. When a third
form had been signed by the police constable and handed to the
owner, the process of requisitioning had been accomplished in due
legal form.

This procedure was followed early in March 1915. Two
officers were sent to Liverpool and made a tour of the warehouses
where the bag merchants kept their stocks. In a single afternoon
they succeeded in obtaining one and a half million second-hand
grain sacks. As it was Saturday many of the owners were away
from their offices. When they returned on Monday and learnt
that their whole stock of second-hand bags had been impounded
by the War Office, they wanted to know what price they were
going to receive. The provisions of the Army Act laid down that
the price to be paid for goods requisitioned should be the ‘ fair
market price in the opinion of the purchasing officer’; and that
an appeal might be lodged against his decision with a judge of
the County Court. The price would then be assessed on the basis
of the market price as between a ‘ willing buyer and a willing
seller’. Fortunately for the purchasing officer the question of
what was a fair market price was a matter about which it was
possible to hold a variety of opinions. It might be held on the
one hand that the market price was the highest price obtained by
any dealer on the day before the requisitioning took place. But
a few isolated transactions, influenced largely by the huge demand
which had come from the War Office and from the Allies, could
hardly be admitted as a fair basis for determining the market price.
* Market price ’ was a vague term, but might fairly be claimed to
involve a number of transactions extending over a reasonable
period. It might also be argued that the fact that the War Office
was compelled to get the goods irrespective of price, rendered it.
an ‘ unwilling ’ rather than a ‘ willing’ buyer, and that therefore,

COSTING IN THE JUTE INDUSTRY 39

m arriving at the price, the hypothetical effect of the War Office
demand should be ruled out of account. Whatever the correct
interpretation of the Act might be, the purchasing officer was
clearly entitled to hold any opinion he chose. He accordingly
fixed the price at 2d. per bag on the basis of values ruling before
the abnormal War Office demand had come on the market.
Having arrived at this opinion, he maintained it in spite of the
protests of the bag merchants, and in spite of the fact that some
of them, in anticipation of selling to the War Office, had actually
bought at a higher price than the figure he fixed. Bags had
changed hands at as much as 23d.; and the quotation received by
the War Office which prompted the requisitioning was 6d. per bag.
Invoking the Army Act had thus saved £25,000 on a million and
a half bags. Within three weeks the bags had been converted to
the standard size required and dispatched overseas.

While the available stocks of second-hand bags were being
seized in Liverpool, steps were also being taken to mobilize the
manufacturing resources of Dundee. A meeting of jute manufac-
turers was held at Dundee, at which the War Office representative
explained the extent and urgency of the Army’s requirements.
Dundee, at the time, happened to be exceptionally full up with
private orders. The export trade was booming; it was even
alleged that large quantities of jute yarn were finding their way
into enemy countries. Clearly there was no chance of buying the
vast quantities of bags required in the ordinary course of business.
But the needs of the Army could not wait for the completion of
private contracts. If private contracts stood in the way they
would have to be broken. Under one of the earliest regulations
made under the Defence of the Realm Act, power was taken to
require manufacturers to place their output at the disposal of the
Admiralty or Army Council, and compliance with any such
requirement was stated in the Act to be a good defence in pro-
ceedings for breach of contract. This point having been cleared
up, the manufacturers readily agreed to do all in their power to
meet the Army’s demand, and undertook to put aside their
private work and devote their whole output for three weeks to the
manufacture of sandbags.

Meanwhile, as business men, they wanted to settle the question
of price there and then. This the War Office representative

40 ORIGINS OF CONTROL AT THE WAR OFFICE

refused to do. He explained that a formal letter would be
addressed to each manufacturer applying Regulation 7 of the
Defence of the Realm Regulations. This Regulation provided
that payment should be made at an agreed price or in default
of agreement at such prices as might be determined by the
arbitration of a Judge, in Scotland a Judge of the Scottish
Court of Session selected by the Lord President of the Court
of Session. A discussion then took place as to the basis on
which it would be possible to reach an agreement satisfactory
to both parties. The Dundee manufacturers naturally claimed
that they should receive the market price. A reference to the
diagram on page 451 will show that the price of jute cloth had now
risen to 4d. per yard compared with the 24d. at the beginning
of December 1914, an increase of 78 per cent. in less than four
months. Cloth was 20 per cent. above the average level of
prices for the twelve months prior to the war, while the raw
material was 30 per cent. below it. Whether they were fair or
not, market prices were clearly giving very large profits to the
manufacturers.

The War Office representative argued that in time of war it
was not always reasonable to demand the market price; that
the market price for jute goods had been unduly inflated by the
demands of the Army; that the conditions of a free market no
longer existed owing to the act of requisitioning ; and that it was
no use speculating what the market price might have been if the
War Office had not intervened and forcibly postponed private
contracts. Some other basis must be taken for settling the price.
He suggested that the fairest course would be to fix the price not
on market values but on the actual cost of production with the
addition of a reasonable profit. This suggestion met with little
support. The general view was that, though this might be ideally
the fairest system to adopt, it was quite impracticable. ‘ You can-
not get away ’, it was said, * from the laws of supply and demand.’
Certainly there were difficulties, and some of them were pointed
out. The largest manufacturers were both spinners and weavers,
but the majority were either one or the other. The cost of pro-
duction of the combined firm, which only had to buy raw jute,
would be much lower than that of the weaving firm, which had
to pay the market price for its yarn. How was this difficulty to

COSTING IN THE JUTE INDUSTRY 4]

be met ? The reply was that the value of the yarn required should
also be assessed on the basis of cost. But how was a private
firm to buy its yarn at less than the market price? The War
Office would presumably have to requisition the yarn also.
Finally, what about the raw material? Was it proposed to
requisition raw jute from the natives of India at its cost of pro-
duction? After this reductio ad absurdum, as it then appeared,
the discussion was adjourned. It was clear that the opinion of
Dundee was fairly unanimous in regarding an attempt to obtain
goods for less than they would fetch in the open market as mere
confiscation. They argued that if the Government wanted to
deprive them of part of their profits, the fairer and more straight-
forward course would be to increase taxation all round and put
up the Excess Profits Duty. It was in any case unfair to single
out Dundee for special treatment.

The question of price was not settled at the conference, but
by common consent was postponed for further consideration and
discussion. Meanwhile, the manufacturers were legally bound
by the requisition order, and at once started operations. Contracts
were broken on a wholesale scale; yarn and cloth already sold
and awaiting delivery were diverted to the War Office; the
purchasers had no recourse and had to wait. The export trade
in certain lines came to a standstill. Important trades were
suddenly deprived of packing material; the meat importers
complained that if they could not get their beef wrappers, the
import of frozen meat would come to an end. The position was
explained to the factory girls, and the rate of production at once
increased. Dundee for a time thought of nothing but the needs
of the Army in the trenches. By almost superhuman efforts,
which surprised even the trade itself, four and a half million
sandbags were completed and dispatched to the front within three
weeks.

The question of price was soon settled by bargaining and
compromise. The War Office obtained the assistance of experts
in the trade, who knew the technicalities and could advise when
the price asked was unreasonable. Prices were eventually fixed
at rather less than private purchasers had hitherto been compelled
to pay; but no attempt was made during this preliminary period
to unravel all the problems of ‘ cost of production ’. When stocks

42 ORIGINS OF CONTROL AT THE WAR OFFICE

of cloth were requisitioned from merchants, they received what
they had paid for it, with the addition of a small profit ; not the
price at which they had sold it, or might have sold it but for the
War Office intervention. Similarly, manufacturers’ quotations
were beaten down below the market prices previously ruling.
Voluntary contracts for delivery during May and June were
entered into, without interference with private orders, at prices
more favourable to the War Office than those quoted to private
purchasers. A spirit of moderation and accommodation pre-
vailed, and speculation received a check. This was reflected in
the course of prices in the open market. For the first time since
the end of November 1914 a general fall in prices took place, as
will be seen from the slight depression which appears on the
diagram during the months of April and May.

It was now possible to review the price problem at more
leisure. Was it inevitable that the War Office should always be
in competition with private trade? It was no longer true that
the Government necessarily had to pay more than private in-
dividuals. The weapon of requisitioning put it in a stronger
position for bargaining, and manufacturers had certainly shown
themselves ready to make concessions. But this did not make
any substantial difference. The manufacturer of cloth still had
to buy his yarn in the open market. Even if the weavers were
content with a reasonable profit, the spinners would still be
reaping the full benefit of the laws of supply and demand. An
investigation of the costs of production, with the assistance of
expert advisers, showed that the position at the end of June was
roughly as follows :

5
Market price of one ton of jute : ; ; se Ay
Cost of spinning into yarns. : A ‘ 5 9 Ee,
Total cost of production of yarn ; : . 32
Spinner’s profit ‘ ; é ee per tony el8
Market price of one ton of yarn ; : : . 50
Cost of weaving into cloth c : : : , 6
Total cost of production of cloth ; : Nadie
Weaver’s profit : : j : per ton 6

Market price of one ton of cloth ar as - 62

COSTING IN THE JUTE INDUSTRY 43

The spinner was thus obtaining a profit of 56 per cent., while
the weaver was getting only a normal 10 per cent.

One step had already been taken which pointed in the right
direction. Hitherto when the War Office had wanted bags, they
had had to pay the market price of the complete bag. The sewing
of bags was carried on by separate firms called public calenders,
which worked on a commission basis with charges based on a
common tariff. Bags would be sold to the War Office by merchants
who bought the cloth and had it sewn up on commission. This
had now stopped. The War Office itself requisitioned the cloth
and had it sewn up by the public calenders.

Apparently this principle might be extended. It should be
possible to requisition yarn and get it woven on a commission
basis. The process might even be carried a step farther back.
The Government might buy its own raw material in Calcutta,
ship it to this country, and get it spun into yarn by the spinner.
Provided spinners and weavers could be induced to fall in with
these arrangements and work for an agreed commission or ‘ mar-
gin’ sufficient to cover their expenses and a reasonable profit,
immense economies would be possible, and the whole process of
obtaining supplies would be independent of market prices in this
country from start to finish. The laws of supply and demand,
if not defeated, would at least be temporarily suspended, so far
as supply and demand for the Army was concerned.

The objection to such elaborate measures of State intervention
was that they involved the War Office in intricate commercial
operations for which it was totally unprepared. It was as much
as the War Office could do to keep pace with the demands from
the front by the ordinary process of buying; it had neither the
machinery, nor the staff, nor the experience to carry out a more
ambitious programme. There were no precedents to go upon.
Perhaps Parliamentary sanction would be necessary ; doubts were
even expressed whether the War Office had any statutory powers
to engage in trading operations. But the most convincing argu-
ment against it was that it would mean the Government under-
taking to do work which was essentially the business of the
manufacturer, namely, the buying of his raw material. Each
manufacturer knew his own business best; it was absurd to

44. ORIGINS OF CONTROL AT THE WAR OFFICE

suggest that officials in London could successfully spoon-feed a
whole trade. Firms would be supplied with materials which were
unsuitable for them, and the resulting confusion and discontent
might seriously jeopardize supplies. Finally, the sceptics argued,
it was the business of the War Office to get supplies; it was the
business of the Chancellor of the Exchequer to deal with excessive
profits. Prices were bound to rise in war-time, and high profits did
not so much matter, so long as the greater part was returned to
the Exchequer through the Excess Profits duty.

It was true that the higher prices the War Office paid, the
greater would be the yield of the Excess Profits duty ; but it was
also true that the more economically it could purchase the less
would be the burden on the ordinary tax-payer. It was this
point of view that appealed to the House of Commons and the
Press, when they complained of Government extravagance. So
strongly was this view expressed, that the Army Contracts De-
partment decided that no expedient by which prices could be
reduced must be left untried. From this time onwards the policy
of buying raw materials, and fixing the margin to be paid for each
stage of manufacture on the basis of actual cost and a fair profit,
became the goal consciously aimed at in every trade where the
total demand so far exceeded the productive capacity as to yield
exorbitant profits to manufacturers.

The objection that the War Office was unfitted to look after
the technical details of commercial operations of this kind was
met in the jute industry by appointing Messrs. A. & S. Henry,
Ltd., a large firm of merchants in Dundee, to act as Government
agents, and entrusting to them the duty of purchasing jute goods
and superintending the various stages of manufacture. The
agreement provided that the terms of remuneration payable to
the firm in consideration of their undertaking all duties in con-
nexion with the purchase, inspection, storage, and dispatch of
jute goods, on behalf of the British and Allied Governments, should
be on a sliding scale, with a fixed maximum which left little if any
profit after paying expenses.

The agreement came into force on June 1, 1915.. A War
Department Jute Goods Depot was opened in Dundee under the
management of the agent firm, and henceforth the whole business

COSTING IN THE JUTE INDUSTRY 45

of purchase, inspection, storage, and dispatch of jute goods was
conducted on the spot by an efficient and specialized organization,
thus relieving Whitehall, Woolwich, and Pimlico of a small fraction
of their current work.

The way was now open for putting the first part of the pro-
gramme into effect. Negotiations were opened with the spinners,
and arrangements were made whereby they undertook to supply
yarn to the order of the War Office at special prices based on the
cost of raw material, the cost of spinning, and a reasonable
margin of profit. The yarn was not bought outright. It was
requisitioned and ear-marked for Army requirements, but was not
as a rule paid for by the War Office. Payment was made by the
weaving firm to whom the spinner was instructed to deliver it.
Similar arrangements were made with the weavers, and with the
firms which both spun and wove. So far as possible, the burden
was spread evenly over the whole trade. For some months it was
necessary to take nearly half the manufacturing output of Dundee
for military purposes. The agent firm had to keep exact records
of orders placed, of future requirements, and of current deliveries
from firm to firm; constant adjustments had to be made, mostly
by telephone or by word of mouth, in order to ensure an even
flow of material and to keep the machinery constantly at work.
The Jute Goods Depot took the place of the yarn and cloth
market, and became a clearing house for the transfer of products
at fixed prices.

That the new system worked satisfactorily is proved by the
following figures showing the monthly demands from the Army
overseas and the number of sandbags dispatched each month :

Demanded Dispatched

April : “ : 5,000,000 5,414,000
May F : : 6,000,000 6,619,350
June : , ; . 6,009,000 6,607,000
July : : : : 12,000,000 8,192,000
August . : : é 18,000,000 17,650,000

In the last week in July the Dundee holidays took place. But
for the holidays the July figure would have reached about
11,000,000. The deficiency was made good by drawing on a
reserve of 6,750,000 accumulated overseas.

46 ORIGINS OF CONTROL AT THE WAR OFFICE

An idea of the effort required to produce these quantities
may be gathered from the fact that during July and August
practically every sewing machine in the Dundee factories was
employed in sewing sandbags. The normal rate of production
was about 1,200 a day per machine. But an exceptionally skilled
girl could sew as many as 2,000 bags a day, which works out at
about four a minute.

In negotiating an agreed basis of prices, detailed examinations
of costs of production were made with the assistance of a local
firm of chartered accountants. Though under the Defence of the
Realm Regulations, as they then stood, there was no obligation
on the part of the spinners to accept the ° costings system ’ or even
to allow the Government to examine their costs, they voluntarily
agreed to the fixing of prices on this basis, partly from a genuine
desire to meet the wishes of the War Office, and partly because
they were reluctant to resort to arbitration and have the matter
fought out in open court. The level of prices so fixed was about
25 to 30 per cent. below market prices. Jute yarn selling for
3s. 9d. per cop in the open market was requisitioned at 2s. 8d., and
jute cloth worth 44d. per yard was obtained for 3d. per yard.
Compared with the previous statement of costs and profits, the
position was now approximately as follows :

In the open For the
market War Office
Sad. £ syd:
Price of one ton of jute (common quality) . ‘ : 20 0 0 20 0 0
Cost of spinning into yarn ‘ ; : é F ZOO 12 0 0
Total cost of production . : : ‘ : 32 0 0 32 0 0
Spinner’s profit é : : : : ; tSeOMO 5 0 0
Price of one ton of yarn . 5 : : 4 : 50 0 O 37 0 0
Cost of weaving into cloth 6 0 0 6 0 0
Total cost of production . ; : : 4 56 0 0 43 0 0
Weaver's profit c F : : : ‘ COMO 310 0
Priceofonetonofcloth. . . . . . 62 0 0 4610 0

It will be seen from the diagram of prices that the ‘ requisition ’
prices of yarn and cloth happen to correspond fairly closely with
the average prices of the previous two years; but this result is

COSTING IN THE JUTE INDUSTRY 4G

largely accidental. The fall in the price of raw jute would have
justified a lower level, had it not been that the increased
cost of production offset the reduction in the price of raw
material.

Early in August it became evident that the demand for sand-
bags was rapidly becoming too great for Dundee to cope with
unaided. Attention was therefore turned to Calcutta, where the
jute manufacturing resources were the largest in the world, and
the annual output of cloth was nearly four times as great as
Dundee’s. Market prices in India, as shown on a separate diagram
on page 453 had followed a parallel course. After the outbreak of
war, raw jute had fallen rapidly to 30 rupees per bale in December
1914 compared with 80 rupees per bale in the beginning of the
year. The market for jute cloth was completely disorganized, and
no quotations are available between the end of July 1914 and the
beginning of January in the following year, when trading was
resumed at 11 rupees per 100 yards compared with 16 rupees per
100 yards a year before. From January onwards the same causes
which affected the Dundee market caused a recovery in Calcutta.
By March the price of cloth had risen to 16.8 rupees. The first
War Office intervention at Dundee at the end of March was re-
flected in a slight depression during the next two months, but by
the end of June the level of cloth prices had reached 21.8 rupees,
a rise of nearly 100 per cent. in six months. During the same
period raw jute rose about 50 per cent. The effect of the intro-
duction of the ‘ costings system ’ at Dundee on July Ist is shown
by a sympathetic drop of 10 per cent. in Calcutta during that
month. In September appears a new line for cloth called ‘ re-
quisition price ’, starting at 13.75 rupees per 100 yards, and falling
to 12 rupees in January 1916. This was the effect of applying the
‘ costings ’ principle to Calcutta.

The War Office had no legal power to requisition the output
of mills in India, still less to fix prices on the basis of cost and
fair profit. It was possible, however, to bring indirect pressure
to bear, first by inducing the Allied Governments to make their
purchases jointly rather than in competition with one another,
and secondly, by persuading the Government of India to prohibit
export except under licence. With the co-operation of the India

48 ORIGINS OF CONTROL AT THE WAR OFFICE

Office both these steps were taken. Though the Allied Govern-
ments agreed in principle through their representatives in London
to make their purchases of jute goods only through the agency of
the British War Office, competitive purchases by Allied traders
did not in fact stop until the second course was adopted. Export
of jute goods was prohibited even to Allied countries, and no
licences were granted if the goods were considered to be for
military purposes. Co-operation with the Allies was thus ren-
dered effective by preventing them obtaining their requirements
in any other way.

Negotiations to purchase were successfully carried through in
August and September. The Jute Mills Association of Calcutta
undertook to provide fifty million sandbags monthly at a price
of 17s. per 100 for the British Government, and at corresponding
prices, according to quality, for the Allied Governments. This
was a reduction of about 30 per cent. compared with market
prices. The British requirements alone were thirty-five million
in September, thirty-eight million each in October and November,
and forty million in December. Russia demanded thirty million,
France twenty million, and Belgium six million for delivery up to
the end of the year.

From this time onwards Calcutta provided the bulk of the
supplies, and Dundee was used as a reserve, to make good de-
ficiencies. Large reserve stocks were accumulated, and supplies
could be diverted at short notice to any theatre of war. Early
in 1916 an urgent request was received from Egypt for an imme-
diate supply of thirty million sandbags for use in defending the
Suez Canal against the Turks. Within eight days ships coming
from India were diverted to Alexandria, and had started discharging
sixteen million bags. More ships were on the point of arriving
with further millions, when a telegram was received asking that
further deliveries should be suspended until the masses of bags
congesting the quays, railways, and depots had been cleared
away. |

This experience showed that the largest demands could be
met promptly and without difficulty, and that the situation was
now well in hand. The system adopted had produced the supplies
required, and the prices paid were reasonable and satisfactory.

COSTING IN THE JUTE INDUSTRY 49

In their report of August 8, 1916, the Public Accounts Com-
mittee of the House of Commons drew attention to the control
exercised by the Government over the jute trade, and noted with
approval that the methods adopted had resulted in an eG
saving of £3,000,000 a year on sandbags alone.

The success of this early experiment had Cereachine conse-
quences in the development of State control.

1569.53 E

CHAPTER V
THE LEGAL BASIS OF CONTROL

Defence of the Realm Act — Royal Prerogative — Losses Commission —
Compensation a matter of grace — Requisitioning under the Army Act — ‘ Fair
market value ’ — Regulation 2 8 — Requisitioning from merchants and growers
— Maximum prices and requisitioning — Amendment of Regulation 7 — Prices
to be fixed with reference to cost of production and fair profit without regard
to market price — Compulsory examination of books— February 1916, the
turning-point in costings system — No Parliamentary sanction — Regulation
30 a — Prohibition and regulation of private dealings — Licensing and price-
fixing — Government monopoly — Regulation 2 the most comprehensive
basis for control — Were the regulations wlira vires ?

In the previous chapter an account has been given of the
earliest application of requisitioning and costing on a large scale,
and reference has been made to the insecure legal foundations on
which they rested. For an understanding of subsequent develop-
ments, it is necessary to give a brief description of the gradual
evolution of a legal basis for control.

The Defence of the Realm Act was passed by Parliament in
August 1914, and conferred wide and undefined powers upon
the Government to make regulations for ensuring ‘ the public
safety and the defence of the Realm’. The earliest regulations
made under the Act conferred certain powers on the Admiralty
and the Army Council, such as the right to take possession of land
and factories, and to require manufacturers to produce goods for
naval and military purposes. But there were no powers wide
enough to enable the War Office or any other Department to
exercise complete control of a trade, to determine the basis on
which payment for goods requisitioned should be made, to
regulate dealings, or to prescribe maximum prices. Not only
were such measures ultra vires the Regulations as they then
stood, but it was generally considered that it would be ultra vires
the original Act to amend the Regulations so as to cover them.

Under the Defence of the Realm Act, no provision was made
for settling the question of compensation. The theory was that
in the absence of any express provision by Act of Parliament,
there was no legal right to compensation whatever; that the

THE LEGAL BASIS OF CONTROL 51

Crown had the right to take possession of any private property
by virtue of the Royal Prerogative, and that any compensation
paid was purely a matter of grace. On March 31, 1915, a Royal
Commission was set up to assess claims for compensation in such
cases and to award ew gratia payments for losses incurred owing
to the exercise of the Royal Prerogative. The wording of the
preamble to the Commission’s letter of appointment is as follows :

Whereas We have deemed it expedient that a Commission should
forthwith issue to enquire and determine, and to report what sums (in
cases not otherwise provided for) ought in reason and fairness to be paid
out of public funds to applicants who (not being subjects of an enemy
State) are resident or carrying on business in the United Kingdom, in
respect of direct and substantial loss incurred and damage sustained by
them by reason of interference with their property or business in the
United Kingdom through the exercise by the Crown of its rights and
duties in the Defence of the Realm : Now know ye that We, &c.!

A full discussion of the legal theory underlying the problem
of compensation falls outside the scope of the present inquiry.
But it is important to note that this theory of the Royal Pre-
rogative, whether valid or not, was acted upon throughout the
war; that until an adverse decision was given by the House of
Lords after the war was over, it was accepted without question
by the Courts, including the Court of Appeal; and that it was
thus as much a part of the law of the land as any Act of Parlia-
ment.? It is also important to note that the Defence of the
Realm Losses Commission laid it down as a general principle that
claims for compensation could only be admitted in the case of
individuals who could prove that they had suffered exceptional
interference specially directed against themselves. If damage
was suffered owing to an Order which was of general application
and not restricted to particular individuals, no compensation was
payable. The Crown. could not undertake to compensate all
persons whose business suffered from the effect of war measures
universally and impartially applied.

1 The full text is given in Appendix 2.

2 In 1915 the Shoreham Aerodrome case was decided in favour of the Crown by
the Court of Appeal. C. A. (1915) 3 K.B. 649. It never went to the House of Lords,
since the Government compromised for fear of an adverse decision. In 1920 the De
ee Hotel case was decided against the Crown on appeal to ne House of Lords.

H. L. (E.) [1920] A. C. 508.
B 2

52 ORIGINS OF CONTROL AT THE WAR OFFICE

The Royal Prerogative thus came to play an essential part in
the development of control. It was by virtue of the absolutist
theory that the subject had no legal right to compensation against
the Crown, that the tyranny of market prices was overthrown.
It was because compensation for property requisitioned need only
be made ea gratia that the costings system could be, and was,
legally enforced; and it was the principle laid down by the
Defence of the Realm Losses Commission that no compensation
was payable for losses inflicted by measures of general application,
which made the régime of maximum prices and the prohibition
of private dealings administratively possible without causing
State bankruptcy. It was explained in the House of Commons
on the first reading of the Indemnity Bill on May 3, 1920, that if
the decision of the House of Lords which repudiated this theory
was not superseded by legislation, innumerable claims would be
opened up and the State would be faced with liabilities for com-
pensation running into hundreds of millions of pounds.*

The attempts made by the War Office early in 1915 to check
the constant rise in market prices of jute goods were of two kinds :
first, the seizure of stocks in merchants’ hands, and secondly, the
requisitioning of the future output of manufacturers. The two
cases present quite different problems and must be kept distinct.

The first case was originally covered by Section 115 of the
Army Act, which provided that the price to be paid for goods
seized from the owner should be based on the ‘ fair market value ’.
But since the market value was all the time being inflated by the
huge demand for military purposes, this provision rendered
requisitioning useless as a means of reducing prices. It would be
no deterrent to the speculator; unless he was hoarding for a
further rise, it would be a matter of indifference to him whether
he sold his stocks by voluntary agreement or had them requisi-
tioned at their market value. Indeed, it might be argued that
the market value was precisely the price which the War Office
would have had to pay, if it had not requisitioned. When second-
hand sacks were requisitioned at Liverpool, the circumstances
were in many ways exceptional. Since the huge demand for
» sandbags had only recently come on the market, and since action

1 Parl. Debates, Commons, vol. cxxviii, col. 1765.

THE LEGAL BASIS OF CONTROL 53

had been taken fairly promptly, it was possible for the purchasing
officer to discount the greater part of the effect of this demand
and still maintain that the price paid was a fair market price.
Even so, the result was that certain dealers had to part with
their goods at a-price actually lower than that which they had
paid for them a day or two before. Though the principle adopted
may have been justifiable in the particular circumstances (some
of the dealers who escaped without loss were inclined to welcome
the action of the War Office as a well-deserved punishment
inflicted on their rivals for speculating in Army supplies), it
obviously could not be universally applied without inflicting the
greatest hardship on bona-fide traders and paralysing legitimate
commerce. If the market price was unfair to the Government,
anything less than the market price would often be grossly unfair
to the individual trader.

No advance in the solution of the price problem could therefore
be looked for by occasional requisitioning of merchants’ stocks
under the procedure laid down by the Army Act. Recourse was
therefore had to an amendment of the Defence of the Realm
Regulations.

In February 1916 an amendment of the Defence of the Realm
Regulations was made which superseded Section 115 of the Army
Act.* It gave the Army Council power, under Regulation 2 B,
‘to take possession of any war material, food, forage, and stores
of any description and of any articles required for or in connexion
with the production thereof’. In the absence of any provision
as to price, holders would have no legal recourse, and in the
absence of agreement would have to appeal, not to the Courts,
but to the Defence of the Realm Losses Commission. This was
an improvement on the Army Act, but it still left doubt as to the
principle on which ‘in reason and fairness’ payment should be
made in such cases. Accordingly a year later Regulation 2B
was amended, and express provisions were laid down as to the
basis on which compensation should be paid. A distinction was
made between stocks seized in merchants’ hands, and food,
forage, or war material requisitioned from the producer. In the
latter case the chief consideration was to be not the market price,
but the cost of production ; in the former case the provisions were

54 ORIGINS OF CONTROL AT THE WAR OFFICE

more complicated, being designed on the one hand to discourage
mischievous speculation and hoarding, and on the other hand to
safeguard the bona-fide trader against loss. Regard was to be
had to the price paid for the goods, provided that that in itself
was not unreasonable or excessive, and to the rate of profit
normally earned in selling such goods; but a person who had
acquired them ‘ otherwise than in the usual course of his business ’
was to receive only a reduced rate of profit or even no profit at all.
The full wording of the Regulation is as follows:

28. It shall be lawful for the Admiralty or the Army Council or the
Minister of Munitions to take possession of any war material, food, forage,
and stores of any description and of any articles required for or in connexion
with the production thereof.

Where any goods, possession of which has been so taken, are acquired
by the Admiralty, Army Council, or the Minister of Munitions, the price
to be paid in respect thereof shall in default of agreement be determined
by the tribunal by which claims for compensation under these regulations
are, in the absence of any express provision to the contrary, determined.

In determining such price, regard need not be had to the market price,
but shall be had :

(a) if the goods are acquired from the grower or producer thereof, to
the cost of production and to the rate of profit usually earned
by him in respect of similar goods before the war and to whether
such rate of profit was unreasonable or excessive, and to any
other circumstances of the case ;

(b) if the goods are acquired from any other person than the grower
or producer thereof, to the price paid by such person for the
goods and to whether such price were unreasonable or excessive
and to the rate of profit usually earned in respect of similar
goods before the war, and to whether such rate of profit were
unreasonable or excessive and to any other circumstances of
the case ; so, however, that if the person from whom the goods
are acquired himself acquired the goods otherwise than in the
usual course of his business, no allowance, or an allowance at
a reduced rate, on account of profits shall be made.

Provided that where by virtue of these regulations or any order made
thereunder the sale of goods at a price above any price fixed thereunder
is prohibited, the price assessed under this regulation shall not exceed the
price so fixed.

If, after the Admiralty or the Army Council or the Minister of Munitions
have issued a notice that they have taken or intend to take possession of
any war material, food, forage, stores or article in pursuance of this
regulation, any person having control of any such material, food, forage,

THE LEGAL BASIS OF CONTROL 50

stores or article (without the consent of the Admiralty or Army Council or
the Minister of Munitions) sells, removes, or secretes it, or deals with
it in any way contrary to any conditions imposed in any licence, permit,
or order that may have been granted in respect thereof, he shall be guilty
of an offence under these regulations.

It will be noticed that the Regulation contains a further
provision that where a maximum price had been fixed for any
commodity requisitioned, the compensation payable should not
exceed the maximum price. This clause meant that the Govern-
ment could seize private property and virtually fix its own price,
a power implicit in the doctrine of the Royal Prerogative, but
never yet so openly avowed. But a due regard for legal form
was shown. On one occasion when the War Office desired to
requisition certain classes of woollen material in merchants’
hands, an order was drafted requisitioning the goods and fixing
prices at the same time. The Department’s legal advisers, how-
ever, objected to this; they explained that though it was lawful
to fix a maximum price and then to requisition, it was not law-
ful to requisition and fix maximum prices in the same order.
The War Office accordingly adopted the expedient of issuing
two orders following closely one after the other, the first, a
Maximum Prices Order, and the second, a Requisitioning Order.
The result was the same, but the scruples of the legal experts had
been respected.*

The later history of Regulation 2B has been inserted out of
its chronological order, so as to complete the account of the way
prices were fixed when goods were requisitioned from stock—the
problem that faced the purchasing officer at Liverpool.

Attention must now be given to Regulation 7, which already
existed in its original form in March 1915, and was brought into
use in requisitioning the output of Dundee manufacturers. In
the case of manufacturers’ output the goods requisitioned are not
yet in existence ; they have not been bought and sold and passed
through a number of hands in the open market ; at the time when

1 In February, 1920, in the Newcastle Breweries case, Regulation 2 B was declared

to be invalid and the petitioners were said to be entitled to the market price for rum
requisitioned by the Admiralty. (1920) 36 Times L. R. 276 and (1920) 1 K. B. 854.

- Before however the case was heard on appeal, it was cleared up by the Indemnity Act,
1920, 10 & 11 Geo. V, c. 48, which by implication validated this and other Regula-

tions.

56 ORIGINS OF CONTROL AT THE WAR OFFICE

they are ordered even their future market value is to a certain
extent problematical, and depends on the future course of market
prices. Further, the manufacturer cannot be said to own goods
not yet in existence, though he may own the raw materials. What
he is required to do under a Requisitioning Order is to perform
certain operations which will transform these materials into the
goods required. In a sense, then, it is the raw materials and not
the future goods which are requisitioned ; and the manufacturer
is merely instructed to work them up. So long as he receives the
full value for his raw materials and the actual expenses of working
them up, and in addition is granted a reasonable rate of profit
comparable to what he would have received in normal times, he
has suffered no damage. Requisitioning at less than market
prices may therefore be fair and reasonable to the manufacturer
when it is unfair to the merchant. For the manufacturer, though
he is deprived of future profits, does not incur a loss; whereas
the merchant, though he may have bought the goods a long time
ago when prices were lower, may equally well have bought them
only the day before, and consequently will lose money if he
receives less than the market price.

In 1915 Regulation 7 ran as follows :

The Admiralty or Army Council or the Minister of Munitions may by
order require the occupier of any factory or workshop in which arms,
ammunition, or any warlike stores or equipment, or any articles required
for the production thereof are manufactured, to place at their disposal
the whole or any part of the output of the factory or workshop as
may be specified in the order; and the occupier of the factory or
workshop shall be entitled to receive in respect thereof such price as, in
default of agreement, may be decided to be reasonable having regard to
the circumstances of the case by the arbitration of a Judge of the High
Court selected by the Lord Chief Justice of England in England, by
a Judge of the Court of Session selected by the Lord President of the Court
of Session in Scotland, or by a Judge of the High Court of Ireland selected
by the Lord Chief Justice of Ireland in Ireland.

If the occupier of the factory or workshop fails to comply with the
order or without the leave of the Admiralty or Army Council or the
Minister of Munitions delivers to any other person any part of the output
of the factory or workshop to which the order relates he shall be guilty
of an offence against these regulations.

For the purpose of ascertaining the amount of the output of any such
factory or workshop or any plant therein the Admiralty or Army Council

THE LEGAL BASIS OF CONTROL 57

or the Minister of Munitions may require the occupier of any such factory
or workshop, or any officer or servant of the occupier, or where the occupier
is a company any director of the company, to furnish to the Admiralty
or Army Council or the Minister of Munitions such particulars as to such
output as they may direct, and if any such person fails to comply with
any such requirement he shall be guilty of an offence against these
regulations.

The important phrase in this Regulation is the following :
‘the occupier of the factory shall be entitled to receive such
price as, in default of agreement, may be decided to be reasonable
having regard to the circumstances of the case by the arbitra-
tion of a judge.’ This express provision as to price differentiated
Regulation 7 from other Regulations under the Act, and removed
compensation for requisitioning the output of a factory from the
jurisdiction of the Defence of the Realm Losses Commission. No
case had yet gone to arbitration ; it was therefore uncertain how
a judge would interpret the words ‘ reasonable having regard to
the circumstances of the case’. At that time he could hardly fail
to be influenced by the parallel case of goods requisitioned under
Section 115 of the Army Act, where it was expressly provided
that payment should be made on the basis of the ‘ fair market
value’. In any case the very indefiniteness of the clause as it
stood largely deprived the power of requisitioning of its value as
a means of inducing manufacturers to accept what the War Office
would regard as reasonable prices. In Dundee manufacturers had
hitherto accepted the War Office interpretation of the word
‘reasonable’. They had entered into voluntary agreements to
supply goods at prices about 25 per cent. below those ruling in
the open market, and these agreements had the force of legal
contracts. But after the system had been running for some
months, one of the largest firms began to question the justice of
the new principle, and threatened, when the time came for renew-
ing the agreement, to refer the matter to arbitration. The War
Office at once realized that an unfavourable decision would knock
the bottom out of the whole system of control of prices, and that
some means must be found for strengthening the legal foundations
of its policy.

This proved a task of considerable difficulty and complexity.
The legal advisers of the Department were of the opinion that

58 ORIGINS OF CONTROL AT THE WAR OFFICE

since the Defence of the Realm Act contained no provisions as to
prices, any regulation which purported to fix prices or to determine
the basis on which they should be fixed, might be construed as
ultra vires. This may appear surprising in the light of subsequent
developments ; but the theory and practice of later years must
not be imported into a period when the rights of property, freedom
of contract, and liberty of commerce were still invested with much
the same sanctity as they enjoy in times of peace. The practice
of fixing maximum prices by Departmental Order which later
became, under pressure of popular opinion, a universal and un-
questioned procedure enforced in every local court, would in 1915
have been regarded as unconstitutional and legally impossible.
The War Office wished to delete all reference to arbitration
before a judge, to lay down that compensation should be
based on ascertained cost of production and a reasonable profit
defined by reference to a pre-war standard of profit (as under the
Munitions of War Act and the Excess Profits Duty), and to leave
a right of appeal to the Defence of the Realm Losses Commission
as under other Regulations. But in deference to the views of the
legal advisers this programme was abandoned. A compromise
was reached whereby arbitration before a judge was retained,
but instructions were given to the arbitrator as to the principles
which he should follow in determining the price. The only
amendment necessary therefore was to substitute a rather more
precise definition of the words ‘ reasonable in all the circumstances
of the case’. The new clause which was embodied in Regulation 7
on February 15, 1916, ran as follows :

In determining such price regard need not be had to the market price,
but shall be had to the cost of production of the output so requisitioned
and to the rate of profit usually earned in respect to the output of such

factory or workshop before the war, and to whether such rate of profit
was unreasonable or excessive, and to any other circumstances of the case.

The words which required the arbitrator to consider whether
the pre-war rate of profit was unreasonable or excessive were
a refinement subsequently inserted at the instance of the Ministry
of Munitions. Whether a judge of the High Court appointed by
the Lord Chief Justice of England would have regarded himself
as bound by this amendment of the Regulation, or would have

THE LEGAL BASIS OF CONTROL 59

dismissed it as ultra vires, need not here be considered, nor was it
at any time of very great importance. So far as the writer is aware,
no case ever went to arbitration before a Judge of the High Court
under this Regulation. The main object was to be able to make
use of this provision (which until it was overthrown was as much
the law of the land as any other part of the Regulations) in future
negotiations with Army contractors. The patriotism and sense
of justice of the majority might be relied upon to accept the
principle laid down, so long as it was applied impartially all
round, and could be legally enforced, if necessary, against
a recalcitrant minority.

This amendment, however, was not in itself sufficient. It
was no use having the power to-base prices on cost and normal
profit, unless reliable information on these points could be ob-
tained when the necessity arose from the books of manufacturers.
This involved a new principle, the compulsory examination of
books. Again the legal advisers considered it doubtful whether
the Defence of the Realm Act was intended by Parliament to
confer such powers on the Executive. No Regulation of the kind
could therefore be validly made under the existing Act. It was
argued that it would be necessary to pass a short Act through
Parliament covering the point. This course, however, would
involve delay and considerable risk of failure. The House of
Commons had in fact refused to give this very power to the
Revenue authorities, when they had asked for it in connexion
with the administration of the Excess Profits Duty. The com-
mercial advisers of the War Office regarded the proposal with
equal or greater misgiving. Members of the Contracts Advisory
Committee feared that the business community would never
submit to an inquisition of this sort, and that such an unprece-
dented extension of the powers of the State would cause an
outburst of indignant protest. The Director of Army Contracts
insisted, however, that without this power administration of the
new system would be impossible; that he would otherwise be
dependent on manufacturers’ own assertions of their costs and
profits with no means of checking them; and that even if in
practice the power was seldom used, it was essential to hold it in
reserve in order to deal with less scrupulous firms. After two

60 ORIGINS OF CONTROL AT THE WAR OFFICE

hours’ debate the Contracts Advisory Committee reluctantly gave
their assent, and the amendment was made by Order in Council
on the same day as the former amendment. Traces of the mis-
givings with which it was made are indicated by the phraseology
adopted. No explicit reference was made to the compulsory
production of books or the right to send officials into a factory to
inspect them. The power was conferred in an almost casual
manner by the insertion of the few unemphatic words ‘ and may
require such particulars to be verified in such manner as they may
direct’. The whole paragraph was then as follows (the words
inserted are in italics) :

For the purpose of ascertaining the amount of the output of any such
factory or workshop or any plant therein and the cost of production of such
output, and the rate of profit usual in such factory or workshop before the
outbreak of war the Admiralty or Army Council or the Minister of Munitions
may require the occupier of any such factory or workshop or any officer
or servant of the occupier, or where the occupier is a company any director
of the company, to furnish to the Admiralty or the Army Council or the
Minister of Munitions such particulars as to the output, cost and rate of
profit as they may direct, and may require any such particulars to be verified
in such manner as they may direct, and if any such person fails to comply
with any such requirements he shall be guilty of an offence against these
regulations.

It was by virtue of this clause, first promulgated in February
1916, that it became possible for the War Office and other Depart-
ments to appoint skilled accountants to make minute investiga-
tions of costs of production, and to bring to light information
which was often a revelation and source of surprise to the manu-
facturer himself. It was the turning-point in the development of
the ‘ costings system ’. From this time onwards the new principle
was firmly installed and remained unchallenged throughout the
war. So far from protesting manufacturers submitted almost as
a matter of course to the examination of their books. Parlia-
mentary sanction proved unnecessary and was never obtained ;
but the results achieved were so satisfactory to the tax-payer
that the Public Accounts Committee of the House of Commons
came to regard this new power as a valuable and necessary safe-
guard of the purchasing Departments. In a recent report the

* Committee on Public Accounts, 4 Dec. 1919, pp. xvi, xvii.

THE LEGAL BASIS OF CONTROL 61

Public Accounts Committee criticized a particular transaction of
the Ministry of Munitions on the ground that the manufacturer’s
books had not been examined to ascertain the cost of production.
In the light of such criticism it is difficult to realize that the power
to examine books was at one time thought to be ultra vires, that it
was obtained almost surreptitiously and without explicit avowal,
and that the War Office was unwilling to ask the House of Commons
to sanction it, for fear that sanction would be refused.

The origin of two of the main pillars of control has been given ;
Regulation 2B governing the requisitioning of stocks and raw
produce, and Regulation 7 laying down the principle of paying
manufacturers on the basis of cost and fair profit. Reference
must now be made to two other Regulations, 30 a and 2 £, which
completed the legal frame-work and in time came to overshadow
the other two in importance. These Regulations rendered possible
State control of trade, the licensing of dealers and the enforce-
ment of maximum prices. There were no provisions either in the
original Act or in the early Regulations enabling the Government
to prohibit or control commercial operations. The first venture
in State trading—the prohibition of private imports of sugar and
the subsequent monopoly exercised by the Sugar Commission—
was based not on the Defence of the Realm Act but on a special
Royal Proclamation. But among the special powers conferred
on the ‘competent naval or military authority ’ (which meant
not the Admiralty or War Office but individual naval or military
officers above a certain rank, conducting operations or command-
ing a district) was the right to prohibit the carrying and the buying
and selling of rifles, ammunition, and other arms ; such a power
was essential in case of a local emergency, such as the landing of
a hostile army, but was clearly not intended to apply to the whole
trade of the country.

This Regulation 30 formed a useful peg on which to hang the
first attempts to supply a legal basis for controlling trade. A new
Regulation was drawn up, called Regulation 30 a, which conferred
similar but more general powers on the Admiralty, Army Council,
and the Minister of Munitions. The authors of the Regulation
were a small Committee consisting of members of the General
Staff, the Ministry of Munitions, and the Contracts Department.

62 ORIGINS OF CONTROL AT THE WAR OFFICE

Their object was to put a stop to the mischievous speculation
that was taking place in war material, such as rifles, which the
Allies were requiring in very large quantities. The official explana-
tion at the time was that enemy aliens and cosmopolitan specu-
lators were buying up supplies of arms and ammunition and
explosives, in order to embarrass the Allied Governments and
place obstacles in the way of supplying the armed forces. It was
announced that only bona-fide British merchants would be licensed
to deal in certain classes of war material, and at the time there
was no intention of interfering with legitimate private trade, still
less of constituting any Government monopoly.

The new Regulation enabled the Admiralty, Army Council,
or Minister of Munitions to schedule a list of articles and classes
of war material, dealings in which were prohibited except under
licence. The original list contained articles purchased for the
most part by the Ministry of Munitions. The effect was in-
stantaneous. A study of intercepted cables (copies of which were
daily supplied by the Chief Censor, and formed a valuable weapon
in the armoury of control throughout the war) showed that the
speculators were badly hit. Offers of millions of rifles were no
longer received from impecunious toy dealers. The Regulation
was later amended in such a way that prohibition of dealings was
extended to transactions outside the United Kingdom by firms
domiciled here. This power of prohibiting British firms buying
and selling in other parts of the world eventually proved of great
importance in facilitating the establishment of State purchase in
foreign markets on behalf of the Allies as a whole. At first the use
made of the Regulation was confined to war material in the
narrow sense, viz. arms, ammunition, and explosives. The
Ministry of Munitions then extended it to certain rare metals,
such as tungsten and molybdenum, which, though they might not
be regarded as specifically war material in normal times, could
be treated as such during the war owing to their being required
almost exclusively as a raw material for high-speed steel.

In September 1915 the Ministry began to impose conditions
on the recipients of licences, among which was the stipulation that
certain fixed prices should not be exceeded. The next develop-
ment came in March 1916, when the War Office made an Order

THE LEGAL BASIS OF CONTROL 63

under Regulation 30 4 prohibiting all private dealings in Russian
flax, a raw material required largely but not exclusively for
military purposes. In this case no licences were granted; the
War Office itself assumed the entire monopoly of the purchase
and import of flax from Russia, transforming four of the principal
flax importers into Government agents.

Regulation 30 a was by this time becoming unsuitable for the
purpose in view. To use it as a means for establishing a Govern-
ment monopoly or the enforcement of maximum prices was only
possible by straining the original intention. The legal advisers
were particularly doubtful whether the power of prohibition and
licensing conferred the right to prescribe regulations such as
maximum prices as a condition of the licence. A local authority
has power to prohibit cinema entertainments except under
licence; but it would be quite illegal for it to lay down as a
condition of the licence that only certain films may be shown ;
that half the proceeds should be paid to the local authority ; and
that the proprietor should not exceed a prescribed scale of
maximum charges. As a result of this opinion the War Office
took the initiative in getting a new Regulation issued by Order
in Council which would give wider and more explicit powers than
Regulation 30 a.

This new Regulation, which was called Regulation 2 £, enabled
the Admiralty, Army Council, and the Minister of Munitions
‘to regulate, restrict, or prohibit the manufacture, use, purchase,
sale, repair, delivery of or payment for, or any other dealing in
any war material, food, forage, or stores of any description, or
of any article required for or in connexion with the production
thereof ’, and laid it down that any person breaking any condition
that might be imposed in any licence or order made under the
Regulation would be guilty of an offence.

This Regulation was the most comprehensive and drastic of
all the Regulations concerned with State control. Though it did
not expressly refer to the fixing of maximum prices, it was in-
tended to be used for that purpose, and legal opinion was satisfied
that it might be so used. It gave a legal basis for rationing
manufacturers and dealers, for enforcing the * priority’ system of
distribution, for cancelling or varying private contracts, and for

64 ORIGINS OF CONTROL AT THE WAR OFFICE

regulating the uses to which a man might put materials already
in his possession. Provided the whole Regulation was not wlira
vires, there was virtually no measure of State interference with
private property and freedom of trade, which could not be legally
justified under its provisions. The much more numerous and
detailed powers subsequently conferred on the Food Controller
might all be regarded as implicit in Regulation 2 £.

The British Common Law is often praised for its elasticity
and adaptability to altered circumstances. The same qualities
are to be found in a marked degree in many of the Regulations
made under D.O.R.A. But the fact is, that in the great majority
of cases, what was lawful and what was not lawful did not so much
matter; what mattered was the extent to which any measure
commanded general support and was applied impartially all
round. Measures of State interference, which went beyond what
the best opinion in any particular trade regarded as necessary and
possible, were practically certain to fail, however valid their legal
sanction. Similarly, many devices which were legally unsound
or doubtful, were enforced without difficulty and accepted without
demur, provided that they had behind them the weight of popular
opinion and the patriotic support of the most influential men in
the trade. The truth of these principles became specially evident
in connexion with the flood of minute regulations issued by the
Food Controller, all of which, according to one school of legal
opinion, were technically ultra vires, since they had only the
remotest connexion, if any, with the defence of the United
Kingdom against an armed invader, which was alleged to be the
sole contingency contemplated by the legislature in passing the
original Act.

PART II
TEXTILES AND LEATHER

CHAPTER VI

RUSSIAN FLAX AND CONTROL OF THE LINEN
INDUSTRY

Extension of costings system to linen industry — Comparison with jute
industry — Difficulties in supply of raw material — Closing of the Baltic —
Decision of War Office to monopolize purchase of Russian flax — Appointment
of buying agencies in Russia — Flax offices opened in London, Dundee, and
Belfast — Co-operation of spinners and manufacturers — Improvements in
supply of raw material — Results of trading operations — Profits and risks —
Usual accounting methods not applicable — Government Departments and
business firms — Controller and Auditor-General and audit of flax accounts
in Russia.

Work of Flax Control Board — Aeroplane linen — Increase of flax production
in United Kingdom — Purchase of seed — Rationing and control of manufacture
— Local Committees — Centralization and decentralization of control.

Soon after the system of requisitioning and costing had been
introduced in the jute industry, attention was directed to similar
problems that had arisen in the heavy linen industry. Both
industries were mainly concentrated in Dundee and district, and
both were essential for military purposes. Indeed a far greater
proportion of the heavy linen output was taken by the War Office
than of jute products. For a few months the two industries were
treated very differently. While jute goods were being supplied at
much under market values, flax products commanded practically
any price manufacturers chose to ask. Jute goods were obtained
by requisitioning ; linen goods by the old method of competitive
tendering, the greater part being supplied not to the War Office
direct, but to War Office contractors and sub-contractors. So
glaring a contrast could not long continue. Jute spinners and
weavers began to complain that they had been singled out for
special treatment, and asked why flax spinners and weavers were
allowed to get any price they could in an unrestricted market. The
general view in Dundee was that the costings principle should be

1569.53 F

66 TEXTILES AND LEATHER

applied all round or not at all. To this the War Office readily
assented, and explained that it was only a question of time before
the system would be applied not only to flax but to other textile
industries.

There was undoubtedly every reason for dealing on the same
lines with the linen manufacturer. The War Office was not
obtaining all the heavy linen goods it required, and was being
compelled to take cotton substitutes in many cases where cotton
was inferior. In the absence of any organized control of the
trade large orders were still being booked for private customers,
and although export was restricted, licences could still be obtained
by manufacturers or merchants who could show that the goods
were already made, and that they were unsuitable for military
purposes. This interfered with War Office supplies, and made it
difficult for army contractors to obtain the canvas they required
for making the finished articles for which they had tendered and
received orders. Meanwhile, the Allied Governments were being
refused permission to buy linen goods and were being compelled to
buy instead in the United States. From the point of view of
economy the need for organized control was no less apparent.
Prices were exorbitantly high. As in the jute trade, it was the
spinner who was making the largest profits, partly owing to the
cutting off of yarn imports from Belgium.

Inquiries soon showed, however, that the new system would
be much more difficult to introduce in the flax trade. The number
of articles into which linen goods and canvas entered was much
greater and more varied than the number of articles made of jute.
Although it had been the practice for some time to buy tent
canvas and issue it to contractors to be made up into tents, this
was not the general practice in purchasing goods made of flax.
There were over thirty items of army equipment, for which the
contractor had to obtain his own supplies of canvas. It was
realised that there would be great economy if the materials
for all these made-up goods could be bought direct and issued
to contractors ; but the change would involve much extra work
in book-keeping, storage, and inspection, which under the existing
pressure at Woolwich would scarcely be possible without opening
a new local depot similar to the Jute Goods Depot at Dundee.

CONTROL OF THE LINEN INDUSTRY 67

Moreover, thejheavy canvases required for all these|various pur-
poses differed widely in quality ; there would therefore be greater
difficulty in fixing standard prices which would be fair to the
different manufacturers and place a relatively equal burden on all.

But the most serious obstacles encountered in the course of
inquiry were the uncertainties with regard to supplies of raw
flax, the big risks which spinners had to run in order to obtain
any, and the impossibility of fixing any basis of prices for the raw
material from which to calculate the cost of yarn. Not only were
the supplies of flax insecure but the quality of what arrived was
not so good as in normal times. Whereas before the war about
30 per cent. was lost in the hackling process, in 1915 the loss was
said to be nearer 60 per cent. ; om the other hand the by-product,
which is sold as tow, commanded a better price than usual.
Variations in the yield, fluctuations in the price, and uncertainties
in delivery made it almost impossible to say what the raw material
was worth; and the necessity of blending a great variety of
qualities to produce the desired strength rendered it still more
difficult to give even an approximate estimate of the cost of
production of the many kinds of yarn which the spinner produced.
It became evident that though it might just be possible with the
aid of experts to apply the costings system if the price of the raw
material were standardized on a stable basis, it would be quite
impossible if the raw material was left uncontrolled.

A leading spinner with whom the position was discussed
stated that the existing high prices were largely due to the
necessity of covering against the abnormal risks of buying flax
in Russia, and that if the Government would undertake to pur-
chase on behalf of the whole industry and guarantee them their
supplies, it would relieve manufacturers of their chief anxiety
and enable them to quote more reasonable prices. Naturally
the War Office was reluctant to assume such responsibility, if it
could possibly be avoided. But events soon made Government
intervention inevitable.

The flax required for making heavy linen canvas (as distinct
from the finer flax grown in Ireland which is consumed by the fine
linen industry of Belfast) was normally imported from Russia via
the Baltic. The Baltic ports being now closed by enemy action, the

F 2

68 TEXTILES AND LEATHER

only means of exporting flax from Russia, apart from a slow and
difficult route through Sweden which was rarely possible or
convenient, was to transport it several hundred miles by a single
line of railway to Archangel and to ship it thence during the five
or six months of the year when the port was not closed by ice.
These natural difficulties were aggravated by the activities of
speculators in Russia. Since there was a great shortage of trucks
on the Archangel railway, a favourite move of the speculators was
to obtain an option on a number of wagons, thus preventing the
holders of flax from obtaining them, and then offer to release them
for a consideration. The confusion thus caused made the business
of buying flax so risky that the merchants began to ask the
manufacturers to assume the risk themselves and pay them a fixed
commission as agents. The manufacturers had then to employ
other agents to try and obtain transport facilities to Archangel
and shipping space to Dundee.

Under such conditions it is not surprising that the amount of
flax imported during 1915 was about 30 per cent. less than the
average pre-war import. Towards the end of 1915 the effect on
prices in the United Kingdom became pronounced. Flax which
sold for about £60 a ton before the war was now quoted at
£115, a rise of nearly 100 per cent. in twelve months. By Feb-
ruary 1916 the existing stocks in merchants’ hands were being
held for a further rise, manufacturers’ supplies were running
dangerously low, and the transport situation in Russia was getting
worse. Meanwhile increased supplies of flax were necessary, if the
needs of the Allied armies were to be adequately met. The
situation had become so serious that in February 1916 the War
Office decided to intervene.

The plan was as follows: first, by centralization of buying in
the interior of Russia, to check speculation and buy as cheaply
as possible ; secondly, to make an arrangement with the Russian
Government for a definite allocation of wagons and thus obtain
priority for flax required for military purposes; and thirdly, to
arrange a shipping programme with the Admiralty for the
shipment of flax from Archangel to Dundee in requisitioned
tonnage.

On March 28, 1916, an Order was issued by the Army Council

CONTROL OF THE LINEN INDUSTRY 69

requisitioning unsold stocks of Russian flax in dealers’ hands and
prohibiting all private dealings in Russian flax both in the United
Kingdom and by British firms in Russia. Four large importing
houses, which had been established in Russia for many years and
had agencies and branches in the interior for buying direct from
the peasants, were appointed sole Government agents; and the
War Office announced that all Russian flax would henceforth be
purchased through these agents on Government account. A
special officer was sent to Archangel to look after flax shipments
and to facilitate its transport from the interior. He was also
instructed to give special attention to the movement of stocks
of flax already bought on private account. As regards finance,
which had been an increasing difficulty to private traders owing
to the collapse of the foreign exchange market, it was arranged
that the Russian Government should place roubles at the disposal
of the British Ambassador for the use of the War Office agent
in Russia and in exchange should receive an equivalent amount
of sterling in London for the purchase of commodities which they
were not permitted to buy out of the sums advanced to them on
loan by the British Government. This proved an attractive
proposal to the Russian Government, which was now finding it
almost impossible to import anything except war material sup-
plied on credit by the British Government, and helped to remove
the objections, which might have become serious, to the new
departure whereby the British War Office monopolized the export,
and practically controlled the price, of one of Russia’s most
important raw materials.

The administrative machinery necessary to carry out the new
policy presented fewer difficulties than were at first anticipated.
In February 1916 a new section of the Army Contracts Depart-
ment had been created called the Raw Materials Section, whose
functions were to act as a bureau of economic intelligence and
research on all matters relating to the supply of raw materials and
to prepare schemes for controlling and safeguarding supplies in.
cases of necessity. This section now became responsible for
the administration of flax purchase. The supervision of the four
agent firms and the technical direction of all the commercial
operations involved was undertaken in an honorary capacity by

10 TEXTILES AND LEATHER

Mr. W. H. Gardner, manager of the flax department of Messrs.
W. F. Malcolm & Co. For three years he carried on the intricate
processes of buying and selling raw flax for the linen manufacturers
of the country with the assistance of a small staff installed in
a few rooms in the Tothill Street Branch of the War Office. The
ordinary routine of a City office was incorporated practically
unchanged into a sub-department of the War Office, and its
current business was conducted on commercial lines quite inde-
pendently of the ordinary machinery of official routine.

In addition to the office in London, a War Department Flax
Office was opened in Dundee, with a branch in Belfast, for the
purpose of supervising the distribution of raw material, the allo-
cation of orders, the investigation of costs, and the application
of the requisitioning and costings system to the linen industry
on the same lines as in the jute industry. These offices were
manned by experts in the trade and were run on business lines
with the minimum of interference from head-quarters.

It was now possible to fix the selling prices of the raw materials
supplied ; manufacturers were able to select the particular grades
or * marks ’ which they required; and linen yarn and cloth were
obtained for War Office requirements at prices calculated to cover
the cost of conversion and a reasonable margin of profit. An
Advisory Committee of flax spmners and manufacturers was
appointed, and every step taken or proposed by the War Office
was fully explained and discussed at the meetings of the Committee.
Once the general policy of State intervention had been accepted,
the detailed applications of the policy and the many practical
difficulties which the War Office had foreseen proved less formidable
than was feared. With goodwill on both sides technical problems
were solved with comparative ease. Without goodwill the same
problems might well have proved insoluble. The drawing up of
standard specifications for yarn, the determination of costs, the
fair allocation of the burden of supplying War Office requirements,
the distribution of the different grades of raw material to different
firms in such a way as to avoid favouritism or discontent—all
these difficulties were smoothed away by the fact that the manu-
facturers themselves were co-operating to make the scheme
a success. It is noteworthy that one of the first fruits of State

CONTROL OF THE LINEN INDUSTRY 71

control was the formation of a Flax Spinners and Manufacturers
Association—a step which had never hitherto been successfully
accomplished, owing to the strong individualism of the flax
trade.

In Russia the new system worked a surprising transformation
in the conditions of flax export. It now became possible to
organize transport by rail and waterway from the interior to
Archangel, to draw up a shipping programme which would lift
all the flax purchased, and by bringing pressure to bear on the
Russian Government and cutting out the speculators to ensure
that the programme was fulfilled. The total quantity of Russian
flax imported via Archangel during 1916 exceeded by about
60 per cent. the amount imported during the previous year and
reached the same figure as imports in a normal year via the Baltic.
At the same time the buying agencies found their task simplified.
Overlapping and competition were avoided by dividing up the
flax-growing districts among the four firms and allotting to each
its sphere of operations. Concentration and co-ordination of
buying checked further inflation during the 1915-16 season. In
later years the occupation of flax-growing districts by the Germans
and the disturbance caused by the Revolution caused prices to
advance, but the increase would certainly have been greater but
for the action of the British Government. In 1914 the price of
a standard grade of Russian flax was £65 per ton. When the War
Office intervened in 1916, the price had risen to £92. In 1917
purchases were made between £133 and £152, and in 1918 the
highest price paid by the War Office was £177. In November
1919 after de-control the price ruling in the open market had
reached £250 and during 1920 prices as high as £360 per ton were
freely paid, this being more than twice the highest price paid by
the War Office during the war.

Trading accounts and balance sheets for raw flax for the
years 1916 and 1919 are given in Appendix 3. Relatively small
purchases of Dutch, Egyptian, and Australian flax were made
from time to time, and the account also includes purchases and
sales of flax seed, which was obtained in many parts of the world,
principally Russia, Holland, Canada, and Japan, for increasing

1 Report on Raw Materials, Cmd. 788, p. 18.

712 TEXTILES AND LEATHER

the acreage under flax in Ireland and reviving flax production in
England. The total purchases of flax and flax seed from March
1915 up to the date of the Armistice, when purchases on Govern-
ment account came to an end, amounted to 163,000 tons of an
approximate value of £20,000,000. A margin of about 15 per cent.
was included in the selling price to provide a reserve fund against
possible losses. By a combination of good fortune and good
management losses owing to the German invasion of north-west
Russia and the disturbances caused by the Revolution were almost
negligible. The most serious losses were caused by enemy action
at sea. A special marine and war-risks account was opened, into
which was credited £15 per ton on flax and 6 per cent. on the cost
of flax seed. At March 31, 1919, this account showed a credit
balance of £70,000, after losses amounting in all to £1,142,230 had
been written off. Over a million pounds worth of flax and flax
seed were lost on steamers sunk by enemy action in the twelve
months from March 1917 to March 1918, the period of the intensive
submarine campaign. These vessels were nearly all sunk in the
North Sea and off the coast of Norway.

The balance sheet drawn up on March 31, 1919, showed
accumulated profits of £2,460,000, stocks in hand valued at
£3,283,000, and a net liability of £923,200 to be set against the
value of stocks. Total sales and stocks on March 31, 1919,
amounted to £18,640,500, and accumulated and prospective profits,
after repaying with interest the whole of the capital advanced
from Army funds, amounted to £4,820,000. This was equivalent to
a dividend of over 60 per cent. per annum for three years on the
capital employed. That such a result was possible, and indeed
almost unavoidable, without any attempt being made to realize
big profits, supplies an interesting side-light on war-time inflation
and the problem of profiteering. The result was due to ordinary
prudent business management. The risks were great and adequate
provision had to be made against losses. As the official com-
mentary points out it was only by good fortune and good manage-
ment that an eventual loss was successfully avoided.1 Moreover,
in spite of the high rate of profit earned, the Government selling
prices for flax were at all times considerably lower in proportion

1 Op. cit., p. 19,

CONTROL OF THE LINEN INDUSTRY 73

than those of any possible competing product, such as cotton or
Italian hemp.

One further point may be mentioned, which has an important
bearing upon the problem of Treasury control of Government
trading transactions. The normal business of purchasing depart-
ments is to estimate what amount of money will be required during
the coming year, to obtain a vote of credit from the House of
Commons for this amount, and to secure that in its expenditure
every penny is accounted for and used to the best advantage.
The Controller and Auditor-General is charged by Parliament with
the duty of investigating the manner in which the money is spent.
No detail is too insignificant for him to pass over and the least case
of waste or loss is liable to be reported upon. All this is no doubt
an essential safeguard for the public exchequer in normal times,
and does undoubtedly secure a high standard of economy and
efficiency in store accounting, which probably surpasses that of
many business firms. The business firm has to satisfy its auditor
that its balance sheet and profit and loss account are correctly
drawn up. It is not the business of the auditor of a company to
draw attention to losses or bad debts, to clerical mistakes, still
less to errors of judgement in buying or selling. It is probable,
therefore, that on the whole there is greater attention to detail and
proportionately fewer losses in Government administration than
in a large private business. Human nature being what it is, how-
ever, the Controller and Auditor-General is always able to point
to mistakes in one direction or another, which are then reported
upon unfavourably by the Public Accounts Committee and
placarded in the newspapers with headlines implying gross
extravagance and colossal incompetence. ‘The impression created
on the public mind is unfortunate, and to a large extent unfair.
It is not the business of the Controller and Auditor-General, nor
of the Public Accounts Committee, to draw attention to any
striking successes or economies. It is not even their function to
apportion praise and blame impartially where they are earned. It
is their principal, if not only, function to draw attention to cases
where they have discovered a misuse or waste of public funds.
The result is that regularly, year after year, when the Controller
and Auditor-General and the Public Accounts Committee make

74 TEXTILES AND LEATHER

their reports, the public are treated to an exposure of dirty linen,
which, being unaccompanied by any fair picture of the whole of
the activities of the purchasing department, engenders a feeling
that Government administration is practically synonymous with
waste and incompetence. Those who have been intimately
associated with the business side of Government administration
recognize that this is not a fair conclusion. Private businesses
are judged by the results they show in their trading accounts
as a whole. A large business is often so little concerned with
minor losses that it will write them off without a qualm as not
worth further consideration. If the same sort of microscopic
searchlight was applied to railway companies, coal-mining or
textile manufacturing as is applied by the Controller and Auditor-
General to Government departments, it is by no means a foregone
conclusion that they would show fewer losses and blunders.

There is, however, another side to the system as it works out
in the War Office and other purchasing departments. ‘The result
of having to answer for everything that happens, no matter how
unimportant it may appear at the time, leads to excessive attention
to details and a too elaborate organization of records and filing.
If there are a few pennies wrong in the account or a few stores
cannot be traced, an immense amount of time and trouble is taken
to investigaté the matter, and if possible to set it right, which in
some cases may cost more than the original trouble. This is where
private business scores. It writes off a loss or a bad debt without
hesitation, if it would cost an undue sum of money to pursue the
matter further.

This difference between Government accounting and the
methods in use in a private business was strikingly illustrated
when the War Office assumed the responsibility for the purchase
of Russian flax in the interior of Russia. Many were the qualms
of the financial and accounting authorities at the War Office when
the conditions of the flax trade in Russia were explained to them.
It was realized that none of the ordinary checks in use in Govern-
ment departments were applicable. It was not merely that you
had to trust to the integrity of the four principal firms selected
as agents, but you had to rely on the integrity and personal state-
ments of all the agents and native buyers whom these firms found

CONTROL OF THE LINEN INDUSTRY 15

it necessary to employ in dealing direct with the Russian peasant.
The practice in the trade was to hand over a certain sum in roubles
to the buyer, who then went to a market and haggled with the
peasants for the best price he could obtain. Whether the amount
of flax which he brought back, or the amount of money which he
had spent, always corresponded with the facts, you had no means
of checking. The illiterate peasant could not even give a receipt
for the money received. The probability is that your buyer robbed
you of a few kopecks per ton. That was of no great concern. Ifhe
tried to rob you of roubles, you would probably find him out sooner
or later by comparing his price with others and then you would
cease to employ him. Then there were other contingencies.
Goods might get lost, stolen, or burnt, and there was no possibility
of insuring them or of checking the exact amount of your loss.
The trade was a rough-and-ready one, and a good deal of latitude
would have to be allowed in the rules and regulations applicable to
Government finance and store accounting, if the War Office was
going into the business. There was, of course, no risk to the Public
Exchequer. The full cost of obtaining the flax would be passed
on to the manufacturers, including an estimated amount to cover
insurance against every kind of loss, and in practice the saving
secured by eliminating competition and controlling prices in the
Russian market was far greater than any possible loss that might
be incurred in the ordinary course of business. One conclusion,
therefore, may be drawn from this first experiment in Government
purchase of raw material, and that is that the system of Treasury
control and investigation by the Controller and Auditor-General
and the Public Accounts Committee is not always compatible
with ordinary trading transactions. Buying and selling, specially
where you are buying agricultural produce from an illiterate
producer, cannot be conducted on the principles of accountancy
designed for the control of normal public expenditure. It is
perhaps fortunate for the reputation of the Raw Materials Sec-
tion that the Controller and Auditor-General never pursued his
inquiries into the heart of Russia and was satisfied with the
certificate of a British firm of chartered accountants, established
in Petrograd, that the accounts of the four agent firms were
properly kept.

76 TEXTILES AND LEATHER

The Flax Control Board

Attention has hitherto been confined to the heavy linen
industry, the output of which was controlled by the War Office.
Brief reference should here be made to the arrangements made for
controlling the fine linen industry of Belfast and co-ordinating the
supply of seed and raw material for both branches of the industry.

On October 23, 1917, a Flax Control Board was appointed by
the War Office, in agreement with the Department of Aircraft
Production of the Ministry of Munitions, to supervise and co-
ordinate the arrangements for securing supplies of flax seed, flax
and flax goods for war purposes. The most important single item
was the manufacture of linen fabric for aeroplane wings. Tens of
millions of yards of fine linen cloth were required for this purpose,
and the bulk of the fine flax needed had to be purchased in the
North of Ireland. Owing to the cutting off of supplies from
Belgium, France, and Holland, anxiety was at one time felt as to
the adequacy of the available resources of raw material; but owing
to the activities of the Flax Control Board and the special measures
taken to stimulate home production and to ration supplies, it was
never necessary during the war to modify the aeroplane programme
owing to a shortage of linen fabric.

On December 8, 1917, the Flax Control Board was recognized
as an allocation sub-committee of the War Priorities Committee
of the Cabinet with power to allocate supplies of linen goods and
raw materials, in accordance with general principles of priority
laid down by the main Committee, between the several depart-
ments and public services. First-class priority was accorded to
aeroplane requirements.

In 1916 the acreage under flax in the North of Ireland was
91,454 acres. In 1917 owing to the rise in prices and the
purchase of seed from Russia, Holland, and Japan by the War
Office, the acreage increased to 107,705 acres. In 1918 the
Flax Control Board succeeded in raising the acreage to 141,538
acres. The whole crop was purchased at guaranteed prices by the
Ministry of Munitions. A company called the Flax Society
Limited was formed in Ireland for cultivating flax in other districts.
Three-quarters of the company’s resources were provided by the

CONTROL OF THE LINEN INDUSTRY iti

War Office and one-quarter by linen manufacturers. Ten thousand
additional acres were brought into cultivation by the Flax
Society Limited.

In England and Scotland the acreage was increased by the
efforts of the Flax Production Branch of the Board of Agriculture
from 800 acres in 1917 to 13,500 acres in 1918.

In order to provide sufficient seed for an increased production
of flax in the United Kingdom, efforts had to be made to find new
sources of supply. In the North of Ireland the seed is usually
wasted. The whole crop is harvested before the seeds have ripened,
so as to obtain the largest amount of fibre. In 1917 an Order was
made by the Army Council under the Defence of the Realm
Act requiring the farmers to save a-certain proportion of their seed.
This Order was administered by the Department of Agriculture for
Ireland with satisfactory results.

A more ambitious project was a Government scheme for the
cultivation of 30,000 acres in Canada for the production of flax
seed. Four hundred tons of Japanese seed were bought by the
War Office and distributed through an agent firm in Winnipeg to
Canadian farmers. A considerable proportion of the resulting
seed crop was damaged by frost; but the balance, which was
reported to be satisfactory, was shipped to Ireland towards the
end of 1918. Purchases of flax seed were also made in Eastern
Canada for shipment to Ireland.

To assist the Flax Control Board in the distribution of raw
material Irish and Scottish sub-committees were appointed at
Dundee and Belfast, consisting of representatives of the industry
and of the supply departments. These committees carried out
the rationing policy of the Board by a system of licences, no
person being allowed to put flax into any process of manufacture
without a licence. During 1918 the committees were the instru-
ment for imposing very severe restrictions on the production of
linen goods for civilian consumption and for the export trade,
and serious hardship was inflicted on the workers in some sections
of the trade. In dealing with questions affecting labour, the
committees were assisted by Labour Advisory Committees.

When the war ended, the evolution of control had resulted in
an efficient and clear-cut organization of the industry for war

78 TEXTILES AND LEATHER

purposes. On the side of demand, the various requirements of
the supply departments were brought together and reviewed in
bulk by the Flax Control Board. The maximum supply of seed
and raw material was obtained by centralized purchase on Govern-
ment account. Home production of flax was stimulated by
guaranteed prices, increased seed supply, and financial assistance
for the cultivation of special areas. Imported and home-produced
flax was distributed to manufacturers at fixed selling prices by
a system of rationing based on priority for the most important
military purposes. And the control of production, the allocation
of orders, and the licensing of traders and manufacturers were
conducted by local committees on which the various interests
concerned, including labour, were represented. The organization
finally reached combined the advantages of centralization and
de-centralization and owed its success to close co-operation
between the various branches of the industry, between four
or five different Government departments, each concerned with
one part of the problem, and lastly between the industry as a
whole and the Government. At the top of the whole edifice was
a representative Board of Control, under an independent chairman.
Under such a system control lost much of its bureaucratic char-
acter and approached nearer to the ideal of responsible self-
government in industry. That such an evolution was possible at
all in such a highly competitive industry as linen manufacturing
is a measure both of the emergency which gave it birth and the
patriotic spirit in which the emergency was faced.

CHAPTER VII
PURCHASE OF RAW JUTE AND MANILA HEMP

Decision to buy raw jute for military purposes — First agency agreement —
Objections in Calcutta — Appointment of Jute Commissioner and allocation of
orders in India — Third and final system adopted — Purchases in the market
in competition with manufacturers — Prohibition of import of jute, February
1917 — Steps to control prices and ration supplies — Resumption of private
imports and methods adopted — Licensing private purchases — Effect on
prices in India and United Kingdom — Purchases for Allied Governments —
Results of Government trading in jute.

Position with regard to Manila hemp, April 1917 — Freights, prices, and
profits — Government purchase — Appointment of buying and distributing
agents — Selling prices — Course of market prices in the Philippines — Results
of trading operations.

WuENn the Russian flax scheme had been successfully launched
in the early months of 1916, the Raw Materials Section began to
turn its attention to other raw materials required by the textile
and leather industries. The present chapter records the develop-
ment of State purchase of raw jute and Manila hemp.

Just as the early experience gained in the jute industry was
made use of in applying the ‘ costings system’ to the flax industry,
so the new experiment of State purchase of Russian flax suggested
the need for adopting the same course in the case of raw jute.
This development was less urgent during the first nine months
of control in the jute industry, because supplies of the raw material
were plentiful and prices were consequently steady. But towards
the middle of 1916 these conditions began to change owing to the
effect of the submarine campaign on the tonnage situation. It
became more difficult to obtain shipping space. Rates of freight
were increasing rapidly, and as a consequence the market price
of raw jute in London and Dundee was rising. Whereas the War
Office was paying only 75s. per ton at Blue Book rates on jute
goods shipped from Calcutta, private importers of raw jute were
paying rates of freight up to 300s. per ton. Since the * requisition
price ’ of jute goods had to be based on the market price of the
raw material, this meant that goods purchased in Dundee cost
considerably more than goods purchased in Calcutta. Further,

80 TEXTILES AND LEATHER

the constant rise in raw jute gave an unearned increment to the
firms who had bought some time before and had accumulated
large stocks. The whole basis of the costings system was thus
being undermined by the rise in freights. To meet this difficulty it
was decided in August 1916 to purchase raw jute in India on
Government account and get it shipped at Blue Book rates of
freight.

The annual requirements of raw jute for the manufacture of
jute goods for military purposes in the United Kingdom was
estimated at 72,000 tons. The difference between the probable cost
of these 72,000 tons delivered to Dundee on Government account
and the market price at the time of arrival was estimated at the
outset of the scheme at £800,000 per annum. But owing to the
rapid rise in market prices and skilful buying by the War Office
experts, the saving on the first 34,560 tons bought had already
amounted to £510,000 in June 1917.4

The exact procedure to be followed in buying jute on Govern-
ment account proved a more difficult question to determine than
was at first expected. Unlike Russian flax, Colonial wool, and
Manila hemp, the War Office did not propose to buy the whole
of the raw material required by the industry, but only the amount
required for military purposes. This left the civilian trade free,
and relieved the War Office of a responsibility which it had no
desire to assume. But as in other cases where half-measures were
taken in preference to complete control, the situation had its
inconvenient reactions. In the case of raw jute three different
methods of buying had to be adopted one after the other, before
a scheme satisfactory to all parties was evolved.

The original plan of the War Office was to appoint a single
firm of large jute shippers and balers to act as sole Government
agents for the purchase of jute in India. An agreement was
drawn up in August 1916 with Messrs. Ralli Bros., whereby
the War Office was to receive a fixed proportion of their local and
up-country purchases of loose jute at the actual prices paid by
them. To this was to be added a fixed charge of 12s. 6d. per ton
to cover all establishment charges, including the work of selecting,
baling, and warehousing from the time of purchase until shipment,

1 Memorandum on War Office Contracts, Cd. 8447.

PURCHASE OF RAW JUTE AND MANILA HEMP 81

and also the services of the firm’s branch in Dundee for purposes
of distribution. The firm also undertook to give up all private
business with Dundee, so long as they were acting as Government
agents. They supplied full particulars of their turnover, establish-
ment expenses and net profit over a period of years. The flat rate
per ton agreed upon actually represented about one-half of their
average annual establishment charges. Neither the firm nor the
Department expected that there would be any net profit to the
partners out of the transaction. In the course of negotiations it
was explained to the firm that it was important to safeguard both
themselves andthe War Office from accusations of unfair monopoly,
and for this reason it was confidently expected that they would
undertake to work for the Government on the lowest possible
terms. This warning was justified, as the sequel proved.

As soon as the arrangement was concluded, an announcement
was made in London and Dundee that the Government would in
future supply Dundee spinners with the raw material they re-
quired for War Office orders through the agency of this firm. No
objections were put forward either by the Dundee manufacturers
or by the London Jute Association, a body representing the jute
merchants and shippers. But when the announcement reached
Calcutta, strong protests were made by the Baled Jute Shippers
Association both to the Government of India and to the London
Jute Association. Resolutions were passed stating that the
appointment of this firm to act as Government agents would act
detrimentally to many other British firms established in Calcutta,
and urging that orders should be shared amongst all shippers of
jute to Dundee on a basis similar to that on which orders for bags
were being placed with Calcutta Jute Mills. The members of the
Association stated that they were prepared to carry out the
reported agreement on exactly the same terms as the firm chosen.
These terms were not yet known in Calcutta, though they were
known to the London houses. |

The reply sent by the Committee of the London Jute Associa-
tion to these protests was that they considered the method chosen
was probably the best that could have been decided upon from
the point of view of the Government. The leading jute merchants
in the City were inclined to attach little importance to the out-

1569.53 G

82 TEXTILES AND LEATHER

burst in Calcutta, which they attributed partly to jealousy and
partly to a suspicion that the firm in question was obtaining
a profitable contract. In their opinion it would be impossible for
any other firm to undertake to supply jute on such favourable
terms as the agents selected, since they were the only large firm
with up-country establishments for buying direct from the
growers.

The Government of India, however, took a different view.
The affair began to assume political importance and the Viceroy
had to insist that the original contract should be cancelled and
that a new agreement should be made on exactly the same terms
with any members of the Baled Jute Shippers Association who
desired to participate. By this time the original terms had become
known, but it was too late for the Calcutta firms to back out.
Though the terms finally agreed upon were not exactly the same—
the clause providing that the agent firm should do no private
business with Dundee had to be dropped and other concessions
had to be made which rendered the contract rather less onerous—
it was by no means a profitable or popular arrangement to the
Calcutta shippers. It involved the appointment of a Jute Com-
missioner by the Government of India, whose business it was to
apportion the burden as fairly as possible among the participating
firms, to obtain returns, to certify costs, and in general to exercise
a rather troublesome supervision over their operations.

After a few months this scheme was dropped by mutual
consent and the third and final system was inaugurated. Mr.
George Malcolm, C.B.E., the manager of the jute department of
the firm originally selected as agents, became a War Office official
and henceforth bought in the ordinary way either in London or
Calcutta from any firm who chose to make offers. Under this
system the Department was free to choose its own time for
buying, and to take advantage of the competition of individual
shippers and the fluctuations of the market.

To operate successfully in this manner is generally considered
to be beyond the capacity of a Government Department. It is
true that the ordinary methods of official routine, necessary and
valuable as they are for administrative and quasi-legal work, are
quite unsuitable for buying and selling in a constantly changing

PURCHASE OF RAW JUTE AND MANILA HEMP 83

market. But war experience showed that there was no inherent
impossibility in grafting upon a Government Department the
methods of Mincing Lane, if and when those methods were clearly
desirable. The sole conditions of success were, first, that the right
man should be chosen for the job; secondly, that he should be
implicitly trusted and left to run his job in his own way; and
thirdly, that he should be judged by results, as a business man is
judged, and not by the completeness of his documentary records
or by his skill in answering parliamentary questions.

Lastly, one might add that he must be reasonable enough to
realize that on broad questions of policy, on legal and parliamen-
tary questions, and on questions of co-ordination he must be
guided to some extent by civil servants trained in methods of
public administration. These conditions were fortunately fulfilled
in the Raw Jute Department of the War Office.

In the official Report on Raw Materials, which gives an
account of the operations of the Raw Materials Department of
the War Office, it is stated that comparisons made from time to
time between the f.0.b. prices paid by the Department and similar
prices paid by manufacturers purchasing on their own account
showed that Government requirements were obtained at least
£4 per ton, that is, about 123 per cent. cheaper than the prices
paid by manufacturers operating at the same time. In addition
the Jute Department was shown to have made its purchases at
advantageous periods of market fluctuations. The Report
continues :

The basis price at which the raw material was supplied to spinners
for conversion into Government goods was kept at the lowest possible
point and never exceeded £84 10s. per ton, c.i.f. basis, for first marks
despite the higher rates of freight and war risks insurance provision. This
figure compares with £32 10s. per ton c.i.f. ruling on Ist August 1914 with
pre-war rates of freight and no war risks insurance, and should be considered
in conjunction with the fact that after all Government control of raw jute
ceased in April 1919 prices gradually advanced until £70 was paid for

first marks in August 1919, when rates of freight ‘were less than the
Government ratefand war risk insurance was also eliminated.

In February 1917, owing to the existence of fairly large stocks
in the country and the necessity of economizing freight space,
1 Cmd. 788, 1920.

G2

84 TEXTILES AND LEATHER

the importation of raw jute on private account was prohibited by
agreement between the War Office and the Import Restrictions
Committee. A considerable proportion of the stocks were unsold
goods held by merchants and middlemen. In order to prevent
a sudden appreciation in the value of these stocks owing to the
cutting off of imports, the War Office issued an Order, at the same
time as the Order prohibiting imports, whereby all unsold stocks
in the country were taken over by the Government at prices based
on market prices ruling immediately before the Order. During
the following six months these stocks were gradually distributed
to spinners as required at cost price plus a fixed charge of £2 a ton
to cover interest and warehouse charges. In this manner the most
critical period of the submarine campaign was successfully tided
over, without importing any supplies except for military purposes
and yet without any advance in prices. The stability thus secured
was of great benefit to Dundee manufacturers and to the trade of
the country.

At the end of six months stocks had been considerably dimin-
ished. In order to maintain production of jute goods required
for other than military purposes, such as bags and packing
materials for all kinds of food and merchandise, the War Office
now had to make arrangements with the Ministry of Shipping and
the Import Restrictions Committee for a resumption of jute
imports on a limited scale for the civilian trade.

At first sight it might seem that the simplest and most con-
venient way of obtaining these supplies would have been for the
Government itself to have bought them in the same manner as it
was already buying its own requirements. But there were three
or four reasons why this course was not adopted in the case of jute,
as it was in the case of wool, flax, hemp, and a number of other
materials. First, there was no world shortage of jute and there-
fore no reason for the Government to buy up the whole jute crop
(except possibly to protect the interests of the native growers ;
but that was the business of the Government of India). If, how-
ever, the British Government had constituted itself a monopolist
in the United Kingdom, it might have been difficult to resist a
demand for a guaranteed price, which would then have had to be
extended to the whole crop. It was therefore desirable to preserve

PURCHASE OF RAW JUTE AND MANILA HEMP 85

as far as possible the appearance of a free market. Secondly, the
spinners werethe best judges of their own requirements, and though
it was easy for the Government to satisfy them with the standard
grades which they required for military purposes, it would have
been difficult and troublesome to satisfy their demands for the
wide range of qualities, including some specialities, which they
required for civilian trade. Thirdly, a Government monopoly
would have hit the merchants and middlemen; it would have
been embarrassing to find work for them all to do. Lastly, there
was the general principle, which underlay most forms of war-time
control, that since the emergency was only likely to be temporary,
any unnecessary dislocation of normal trade channels would react
unfavourably on the resumption-of private trade after the war
and was therefore to be avoided wherever possible.

Some form of control was rendered necessary, however, by
the limitations of tonnage laid down by the Ministry of Shipping.
In the end a compromise was adopted, which left actual pur-
chasing in the hands of private traders, but gave the Government
sufficient control to prevent competition between them for the
limited supplies which could be imported. Only spinners were
allowed to buy for shipment and the ‘ spot ’ market in the United
Kingdom remained suspended. Each spinner received a ration
figure based on his 1916 consumption, which was ascertained by
a census of the whole industry. The ration which he was entitled
to receive bore the same proportion to his 1916 consumption as
the total tonnage available bore to the total consumption in 1916.
Half the ration was supplied by the War Office in the form of raw
material bought on Government account for the production of
military requirements, and for the remaining half he received
licences to purchase and import on his own account. These
licences were issued by the War Office in series, each licence being
for 250 bales. They were recognized by the Government of
India for permission to export from India, by the Ministry of
Shipping for the provision of freight, and by the Import Re-
strictions Committee for permission to import into the United
Kingdom.

This system, which seems complicated and troublesome
enough compared with ordinary commerce or with complete

86 TEXTILES AND LEATHER

Government monopoly, worked without serious difficulty. Manu-
facturers preferred it to the simpler plan of direct Government
purchase of the whole supplies, because it left them greater
freedom of choice in selecting the qualities and grades of raw
material which they required. At the same time they recognized
that it was preferable to unrestricted competition, which would
have forced up freight rates, encouraged speculators to forestall
their requirements, and placed them in continual uncertainty as
regards supplies and prices. As it was, the exporters of raw jute
from India, having large supplies available and a limited outlet, had
to compete keenly with one another for the privilege of supplying
the spinners’ limited demand. By this means prices fell rather
than rose; and owing to the introduction of a rationing system
the enforced shortage in the United Kingdom had the effect of
depressing rather than stimulating the level of market prices in
India. The market in the United Kingdom was in the meantime
virtually suspended.

From 1917 onwards the Jute Department of the War Office
acted as purchasing agent for the French and Italian Governments.
No profit was made out of these transactions, the jute being
invoiced either to the Government or to individual manufacturers
at the actual prices paid by the War Office. The Allied Govern-
ments were responsible, however, under the general arrange-
ments made by the Inter-Allied shipping authorities, for the
provision of their own freight.

An analysis of the Raw Jute trading accounts and balance
sheets (see Appendix 4) shows a considerably lower rate of profit
than the Flax account. This was due to the fact that operations
in jute were safer and less speculative; the risk of eventual loss
being less, the business could be conducted on a smaller margin
of profit. The War Risk Insurance Account shows total losses of
only £257,000 on a total turnover of £11,400,000 and a balance
on the right side of £318,400. It will be noticed, however, that
in the worst year, 1917-18, two cargoes were lost, valued at
£161,000, which practically wiped out the premiums credited to
the fund during that year.

~

PURCHASE OF RAW JUTE AND MANILA HEMP 87

Manila hemp

Manila hemp is grown, as its name indicates, in the Philippine
Islands. It is a strong coarse fibre, admirably adapted for the
manufacture of the strongest cords and ropes. Both for naval
and military purposes, as well as for the mercantile marine and
the railways, Manila hemp was an essential raw material
during the war. About 80 per cent. of the imported supplies were
consumed directly and indirectly for Government purposes. No
effective substitute for this class of hemp could be obtained ;
Russian hemp, Italian hemp, sisal and jute can replace it for
certain purposes, but not for large ropes which have to stand a
considerable strain.

The difficulty in the case of Manila hemp was the remoteness
of the source of supply. Owing to the length of the voyage, 1,000
tons of hemp from the Philippines used up three or four times as
much tonnage as 1,000 tons of Italian hemp from Genoa. Towards
the end of 1916, tonnage became difficult to obtain and freight
rates rose at a phenomenal rate. This led to a reduction of imports
below the rate of consumption; stocks were reduced and the
‘ spot ’ price in the United Kingdom went up by leaps and bounds.

The import trade is in the hands of a few large firms of shippers,
who have head offices in London and branches in the Philippines.
The shippers sell, not to manufacturers direct, but to merchants
and dealers, whose function is to hold stocks and very often to
finance the manufacturer while the goods are being made. Manila
hemp is one of the few fibres which are satisfactorily graded into
standard qualities. Unlike most fibres and many other raw
materials, which are sold under vague descriptions such as ‘ fair
average quality ’, ‘ common middling ’, or * good fair ’"—a practice
which leads to endless disputations and arbitrations—Manila
hemp is officially graded by experts appointed by the United
States Government and classified into standard qualities known
by letters of the alphabet. This useful form of Government
interference was designed primarily to protect the interests of the
native producers; but it also confers a great benefit on the
consumer. The only persons who gain by the lack of standardiza-
tion which exists in most staple trades are the merchants and

88 TEXTILES AND LEATHER

middlemen who profit by the inexpertness of their customers,
and the arbitrators who receive handsome fees for giving their
awards.

The grade of Manila hemp most in demand in this country for
the manufacture of ropes is designated by the letter J. In April
1917 the price of J-grade hemp was £95 per ton c.i.f. London.
This price yielded a profit to the importer of about £35 per ton
or 57k per cent., after paying all charges including a handsome
rate of freight to the shipowner. These facts well illustrate the
futility of reducing rates of freight without at the same time con-
trolling prices. For the only effect of cutting down the share
taken by the shipowner would have been to put a larger share
into the pockets of the importer. Moreover, to blame the importer
and accuse him of profiteering and extortion was beside the point.
The course of prices in the Philippines and in this country was
equally beyond his control; the former being determined by the
anxiety of the grower to sell his produce, and the latter by the
competition of merchants, dealers, and manufacturers to obtain
supplies. The limited tonnage was like a sluice which separated
the two price levels and prevented the stream of supply and
demand flowing freely from one end to the other till a common
level was reached.

The dangerously low level of stocks and the abnormal price
situation led the War Office to intervene. The principal shippers
with branches in the Philippines were appointed Government
buying agents, and the merchants and dealers in the United
Kingdom were employed as distributing agents. The services of
each were paid for at a fixed rate of commission per ton. The
shippers received 30s. per ton and the distributing agents at first
8s. 9d. and later 12s. 6d. per ton.

It is worth noting that the sudden reduction of the shippers’
margin from £35 to 30s. per ton was accepted by them, not merely
without protest, but almost with relief. They admitted that they
felt almost ashamed to be making such high profits. ‘It brought
them little advantage, for the Government took most of it bymeans
of the Excess Profits Duty; but meanwhile they incurred a certain
amount of resentment from rope manufacturers, who complained
that while the shipper was bleeding them, their own profits were

PURCHASE OF RAW JUTE AND MANILA HEMP 89

being limited by the Government’s new practice of examining
their costs.

The procedure adopted caused perhaps less friction and less
difficulty than any other scheme of control. The five or six firms
in the import trade were on good terms with one another and were
perfectly willing to co-operate with the Government. The
managing director of the largest firm accepted an invitation to
serve as a whole-time Government servant and to direct the
operations of a Committee of the agent firms’ representatives which
was set up in the Philippines. The Ministry of Shipping allocated
the necessary tonnage at Blue Book rates of freight, and the
Treasury provided the dollars necessary to finance purchases.
In the eighteen months to the Armistice 106,000 tons were bought
at an approximate cost of £5,000,000.

An interesting point arose in fixing the selling price of
Government hemp. The War Office was now in a position to sell
at about £60 per ton and still make a profit owing to the reduction
in the rate of freight. But a sudden fall of £35 per ton in the value
of their stocks would have caused a serious loss to manufacturers
and dislocated trade conditions. Moreover, there was no certainty
as to the future course of prices in the Philippines, and the object
of the War Office was to maintain prices at a uniform level in the
home market. It was therefore decided to fix the selling price
of J grade at £85 per ton instead of £95, thus giving a profit of
£25 per ton to the Hemp Department. Instead of competing for
supplies in a restricted market, manufacturers were now rationed
at the fixed price in accordance with their normal consumption,
preference being given to requirements for Government purposes.
They were thus relieved of all anxiety as to their supplies and the
fluctuations of the market ; but in return had to submit to a more
rigid determination of costs and profits under the costings system.

When the United States entered the war, American competition
forced the price up in the Philippines to such an extent that the
War Office margin was soon wiped out and in January 1918 the
price of J-grade hemp had to be advanced to £100 per ton. After
the Armistice Government purchases came to an end and a sharp
fall took place in the Philippines. Thereupon the War Office
reduced its prices to the lowest level at which hemp could be

90 TEXTILES AND LEATHER

bought and shipped to the United Kingdom, and in consequence
heavy losses were incurred as an offset to the profits made at an
earlier stage. Later when prices again advanced in the open
market, the remaining Government stocks were realized at a good
profit and the Hemp Department wound up with a balance on the
right side.1

1 Trading Accounts and Balance-sheets are given in Appendix 5.

CHAPTER VIII
ARMY BOOTS

The Duke of Wellington on army boots — Achievements of boot industry
during the war — Quantity, quality, and price — Organization and co-operation
between Government and industry — Early developments — Appointment of
business organizer — Stimulation of production— From trade patterns to
regulation patterns — Examination of costs and profits — Fixing different prices
for individual firms — Objections to strict application of costings — New
system of group prices — District Committees — Levelling up the inefficient.

Boot repairs — A large-scale industry run by the War Office — New methods
and new machinery.

War-time boots — Extension of costing and control to supplies for civilian
population.

Tue Duke of Wellington once summed up his philosophy of
army supply in the following words: ‘ The most important item
of equipment for a soldier is, first, a good serviceable pair of boots ;
second, another good pair of boots ; and third, a pair of half soles.’
Napoleon said that armies march on their stomachs. The Duke
of Wellington thought it more important to observe that they
march on their feet ; a hungry man may sometimes make a good
fighter, but an ill-shod soldier is no fighter at all.

In the present chapter some account will be given of the steps
taken to provide ‘the most important item of a soldier’s equip-
ment’. Little has been heard about this branch of supply,
because for almost the first time in history the boots supplied to
the army from 1914 to 1918 were satisfactory in quality and
quantity. There was no boot shortage and no boot scandal.
This marks a new epoch in the history of army contracts.

The British boot industry is deservedly proud of its war record.
From August 4, 1914, to March 31, 1919, it manufactured more
than 60,000,000 pairs of boots for the British and Allied armies.
In spite of the scarcity of tonnage, the difficulties of obtaining
raw materials, the alterations in plant needed for the production
of large numbers of army boots, and the calling up of skilled
workers for the army, the output of the industry never fell short
of essential requirements. In addition to the unprecedented
demand for military purposes—in 1916 the Russian Government

92 TEXTILES AND LEATHER

placed a single order for seven million pairs of boots—the civilian
population was still able to buy all the boots it required and under
the War Time Boot Scheme was provided with millions of pairs
of good quality at specially controlled prices.

Not only was production able to keep pace with the demand,
but the boots supplied to the armies reached a high standard
of quality. In previous wars there had been frequent scandals
owing to the inferior quality of the boots supplied. Both in
the Crimean War and in the Franco-Prussian War shoddy boots
and ‘ paper soles’ caused hardship and misery at the front and
much heart-searching and denunciation of incompetence and
rapacity at home. There were no paper soles in the boots supplied
to the British or Allied armies in the Great War. Their workman-
ship and wearing qualities were the best that the industry could
produce. The majority of the troops were better shod than they
had ever been as civilians.

But the industry has not only reason to be proud of the quan-
tity and quality of its output. It can also boast that from the
beginning of the war to the end there was little profiteering.
The British and Allied armies were supplied on special terms
which were worked out with the aid of the Government’s costing
experts, and left little more than a reasonable pre-war standard
of profit. Under the War Time Boot Scheme, which was intro-
duced in 1918, the costings system was extended to the supply of
boots to the civilian population, the retail price being fixed so as
to allow a reasonable margin to the retailer.

These results were only accomplished by extensive measures
of national organization and control and by the closest co-operation
between the Government and the industry. In building up the
organization necessary the most important factors were personal
and psychological. As early as October 1914 the War Office was
fortunate in obtaining the services of Sir Edward Penton, K.B.E.,
who was widely known and respected as a partner in one of the
leading firms of boot and leather merchants and manufacturers. In
addition to enlisting the services of one of the foremost experts as
chief of the Boot Department, the War Office received energetic
and loyal support throughout the war from the President of the
Boot Manufacturers Federation and the President of the United

ARMY BOOTS 93

Tanners Federation. The boot and leather trades were organized
during the war with less friction and sectional controversy than
many other industries ; and the chief reasons for this were first
the personal influence of the leading men in authority, and
secondly, the fact that the boot and leather trades were less
individualistic and had already reached a higher stage of organiza-
tion and efficiency than was general in British industries.

Early in the twentieth century British boot manufacturers
were exposed to keen competition from American manufacturers,
who had endeavoured to capture the British market by flooding it
with boots and shoes produced in large quantities with up-to-date
machinery. As a result of this invasion British boot manu-
facturers took active measures to mprove their methods of pro-
duction. They profited by the experience of their competitors
and studied their methods and machinery. Up-to-date machinery
was installed and obsolete plant was scrapped. In the year before
the war the British boot trade was exporting seven times as many
pairs of boots as were being imported from abroad. The energy
and initiative displayed in meeting American competition enabled
British manufacturers not only to hold their own, but to compete
with increasing success in the markets of the world.

The normal requirements of the British Army for boots in
time of peace were about 250,000 pairs per annum. These require-
ments were easily met by inviting competitive tenders from
manufacturers. A few large firms, mostly concentrated in
Northamptonshire, specialized in the standard army boot. There
were no large reserve stocks in army depots, owing to considera-
tions of space and economy, and no plans were in existence for
rapidly expanding production to meet an emergency such as that
which arose in August 1914.

The course of events in the first few months of the war has
been described in a previous chapter. Almost immediately the
system of centralized buying broke down. Local commands and
Territorial Force Associations did their best to buy boots of any
kind, but for several weeks most recruits had to be content with
the boots they had brought with them from civilian life. At
head-quarters large purchases were made from stock. The ware-
houses of dealers, factors, and large stores were ransacked, and

94 TEXTILES AND LEATHER

the market was stripped bare. Even so it was impossible to keep
pace with the flood of recruits pouring into the depots, and for
a time even the troops in France had to be content with a miscel-
laneous assortment of ‘trade patterns’, large quantities being
required to replace stores lost in the retreat from Mons. For
a time everything was in confusion. Inadequate and overworked
staff, lack of accommodation, congested depots and warehouses,
competitive buying by local commands and Allied Governments,
uncertainty as to future requirements, the inertia of the official
machine, and the activities of ‘sharks’ and speculators all com-
bined to create a situation which might have had serious conse-
quences. Fortunately the period of preliminary chaos did not
last long. Only years of preparation for a European war on
a scale never dreamt of could have prevented it, and only an
organization which was essentially sound and efficient could have
reduced it to order in so short a time.

The steps by which this came about have been indicated.
Closer relations began to be established between the Government
and the industry. Co-operation was achieved by personal contact
and conference. The diplomacy of pre-war negotiations gave
place to friendly discussions between experts. These methods
were successfully practised by the Board of Trade officials respon-
sible for helping the Alhes to obtain their requirements and their
success had attracted Lord Kitchener’s notice.

Early in 1914 the French Government applied through its
representative on the Commission Internationale de Ravitaille-
ment for permission to place orders for two million pairs of boots of
the French regulation pattern in the British market. The novelty
of the design rendered it doubtful if such a large order could be
carried out in reasonable time. But among the experts who were
called in to advise the Commission Internationale de Ravitaillement
was the head of one of the largest firms of boot and leather mer-
chants and manufacturers. This firm undertook to place its
organization at the disposal of the French Government for the
purpose of securing delivery of the boots required. The arrange-
ment proved satisfactory. By the middle of November 1914,
within three months of the placing of the first order, a million pairs
of boots had been dispatched to France, and the whole two

ARMY BOOTS . 95

million pairs had been completed and delivered by the following
March.

When Lord Kitchener had secured the services of the Director
of the Exhibitions Branch of the Board of Trade and had appointed
him to the post of Director of Army Contracts, Sir Edward
Penton, the head of the firm which had carried through the
supply of boots for the French Army, was invited by the War
Office to give up his private business and to undertake the
organization of the supply of boots for the British Army as a:
salaried Government servant. This was one of the first occasions
on which a civilian expert was taken from private industry
and appointed to a responsible post in the official machine.
Only the extreme emergency and-the acute anxiety felt as to
the possibility of meeting the vast demand from the troops
rendered such a step acceptable to both parties. As it turned out
no appointment made during the war was so abundantly justified.
The War Office had found just the type of business man that it
needed—a first-rate organizer who knew how to adapt himself to
work in a Government office. Not only did he possess a wide and
specialized knowledge of the boot and leather trades, but his
ability and popularity gave him widespread influence and inspired
confidence.

Within a short time a new Army Boot Department had been
organized with head-quarters at Marylebone, and a skilled staff
of specialists had been drawn from the trade itself. In the first
few weeks of the war, the congestion in the regular army depots
was such that it was impossible to handle more than about 10,000
pairs of boots a day. When the new depot was in working order,
as many as 60,000 to 70,000 pairs could be unloaded, inspected,
and re-issued in a single day. At one time 200,000 pairs were
dispatched to the front within twenty-four hours. In the middle
of 1915 there were more than five million pairs of boots in store.
Sixty different patterns of boots were required by the British and
Allied armies, some of which had to be made in ten or twelve
different sizes. In addition to the usual ankle boot issued to the
troops, there were knee boots for cavalry behind the line; gum-
boots for use in the trenches ; mosquito boots for use in tropical
countries ;_ slippers and shoes for hospital use ; special boots for

96 TEXTILES AND LEATHER

aviators; women’s boots for the W.A.A.C.; and a number of
other special varieties.

While arrangements were being made at head-quarters for
handling and inspecting the millions of boots required, steps were
taken to induce manufacturers to expand their factories and plant.
The quantity of heavy boots required was far in excess of the
normal production. It was therefore necessary to induce firms
which before the war had specialized in the manufacture of lighter

-boots for town wear and women’s and children’s boots and shoes,
to install new plant and to train their workers for the manufacture
of army boots.

Until the end of 1914 the chief consideration was to get supplies.
Trade patterns of almost any kind were accepted from stock, and
manufacturers were invited to tender for two subsidiary patterns
easier to make than the regulation pattern. It was not till January
1915 that it was found possible to supply only regulation pattern
boots even to the troops in France, and it was only a year later
that there were sufficient regulation pattern boots to supply all
the forces at home and abroad. These facts emphasize the vast
amount of expansion and alteration of plant required to cope
with the army’s requirements. Eighteen months elapsed before
the supply of regulation pattern boots had fully caught up with
the demand.

The question of price was of secondary importance in the early
stages of the war, but steps were taken to put a stop to the con-
tinuous rise of prices more promptly than in the case of many other
articles. The pre-war price of regulation pattern army boots was
about 13s. per pair. By October 1914 the price had rushed up
to 19s. or 20s. per pair, and the highest price paid during the war,
22s. 6d. per pair, was reached as early as July 1915. Even at that
time the price would have been considerably higher but for action
already taken to modify the natural operation of market forces.

Before the end of 1914 the normal system of competitive
tendering had been modified. Orders were placed in large quan-
tities sufficient to keep the factories fully employed for six months
ahead, and prices were kept down by bargaining and informal
negotiation below the highest level quoted by some manufacturers.
As early as April 1915, nearly a year before the Defence of the

ARMY BOOTS 97

Realm Regulations had been amended to legalize the application
of the costings system, manufacturers were asked to supply
figures of costs and to justify the prices asked by disclosing their
estimated net profit. By this means the normal price paid was
gradually brought down from about 22s. to 18s. 6d. per pair. At
an early stage it became clear that the output and price of the
finished article depended chiefly upon the supply and cost of the
raw materials. It therefore became necessary to go behind
the boot factories and to deal with the sources of raw material.
The resulting arrangements with the tanners are described
later.

When power had been obtained in February 1916, under the
amended Regulation 7, to investigate manufacturers’ books and
to requisition output at prices based on cost and a reasonable
profit, the costings system was applied more strictly and sub-
stantial reductions of price were found possible. Each manu-
facturer was required to submit costings certified by a chartered
accountant of recognized standing, and these costings were
individually examined by the experts and accountants employed
by the War Office. Owing to the great variety of leathers used,
it was not possible to determine a fixed schedule of prices which
would be generally applicable. The cost of production was found
to vary greatly in different factories, depending on the standard
of organization, the overhead charges, and the skill of the workers.
The plan first adopted, therefore, was to lay down a fixed rate of
profit, applicable to all factories alike, and to add this to the
certified costs of each individual factory.

Though this method was successful in bringing about a sub-
stantial reduction in the total expenditure of public funds, it was
found to involve much delay in the settlement of accounts and an
unnecessary amount of work. There are approximately three
hundred boot manufacturers in the country and nearly all were
engaged on army work. ‘To examine each individual firm’s
accounts and to fix a separate price for each was a colossal task.
And though this was the logical outcome of a strict application
of the principle of paying on the basis of cost and fair profit, it
was open to the serious objection that the higher the overhead
charges and the greater the inefficiency in any factory the higher

1569.53 H

98 TEXTILES AND LEATHER

was the price paid. Such a result was unfair and uneconomical.
Overhead charges were bound to be heavier in certain factories,
such as those which specialized in fancy shoes and specialities,
and it was right that firms which had incurred a heavy expense
in adapting unsuitable machinery and premises to the production
of army boots should be compensated by receiving a rather higher
price than the regular army boot contractor. But where higher
costs were due to inefficiency, extravagance, and bad organization,
and lower costs to efficiency and good management, it was anoma-
lous and unfair to fix prices strictly on the costings system for
each individual factory. The effect was similar to that of the
Excess Profits Duty ; economy and efficiency were discouraged.
This difficulty, which arose in other trades and industries subject
to control, will be treated more fully in a later chapter on the
Costings System.

In the boot industry the solution adopted was a compromise.
Neither a uniform price for all nor individual prices for each were
satisfactory. After the first experiment, therefore, when more
exact knowledge had been obtained of the chief causes of varia-
tion in the costs of production, a new system was introduced,
under which uniform prices were paid to groups of manufacturers,
whose costs of production were approximately the same. This
meant that the prices varied roughly according to districts, each
district tending to specialize in normal times on a particular type
of product. A committee of manufacturers was appointed in each
district, which negotiated with the War Office experts on the basis
of information obtained by chartered accountants as to actual
costs. By this means the variations in the prices paid for the same
type of boot were reduced to reasonable proportions, and a great
economy of time and labour was rendered possible. It might be
supposed that this system of grouping manufacturers would
strengthen their hand against the Department. In practice the
opposite result was achieved. The majority were satisfied if the
normal cost of the average firm was taken as the basis of calcu-
lations, and were not unwilling to see the less efficient firm
penalized by receiving less than a normal profit owing to its higher
costs. The general effect therefore was to encourage efficiency and
economy by levelling up without levelling down.

ARMY BOOTS 99

Boot repairs

Second only in importance to the manufacture of new boots
was the organization created for repairing old boots. During the
last year of the war more boots were being issued from army repair
workshops than were being received from manufacturers. In 1917
250,000 to 300,000 pairs of new boots were being delivered to the
War Office each week. In 1918 the weekly deliveries of new boots
fell to 150,000 pairs and the output of repaired boots rose to
250,000 pairs a week. ‘The repair of army boots had become a
large-scale industry organized and run by the State. Boot repair
workshops were attached to all the overseas forces. The boot
repair factory set up by the Army Ordnance Corps at Calais had
an output of over 30,000 pairs a week. In Great Britain four
repair factories were established and were run almost entirely
with women’s labour. In addition to the large factories there
were several hundred regimental workshops in which soldier labour
was employed.

In the repair factories the work was done for the most part by
machinery of a new type invented by an official in the Boot
Department. In the regimental workshops where the bulk of the
work is done by hand, subdivision of labour and team work were
introduced, and a collective bonus was paid on all repairs exceed-
ing an output of six pairs per man per day. Under the old system
three pairs per man was a usual day’s work. The private con-
tractor was no longer employed for repairing work.

The repairing organization consumed a large quantity of boot
leather. At the London factory alone two million Ib. of leather
were used in the first nine months of 1918, and several million
pairs of half soles were issued to repair workshops at home and
overseas.

War Time boots

Towards the end of the war the provision of essential supplies
for the civilian population became almost as important a part of
the Government’s duties as the supply of army boots. The
beginning of control of civilian prices was an order issued on
August 31, 1917, releasing for civilian consumption certain
descriptions of sole and upper leather made from imported hides.

H2

100 TEXTILES AND LEATHER

The prices were limited to 2d. per lb. over the prices paid by the
War Office, and a certain proportion was allocated for the needs
of boot repairers. Early in 1918 a system of rationing leather
supplies was introduced under the Leather Certificate Scheme, and
the War Time Boot Scheme was launched.

The object of the War Time Boot Scheme was to enable the
civilian population to obtain boots and shoes of sound quality
at prices below the market prices ruling at the time. Leather was
allotted to manufacturers below the market value and _ profits
were limited to a reasonable standard by the application of the
costings system. Every boot and shoe produced was branded
with the fixed retail price, which allowed a reasonable margin both
to the wholesaler and retailer. During 1918 fourteen million pairs
were sold and another seven million were placed on the market
in. the first three months of 1919, before the scheme was brought
to an end.

CHAPTER IX
HIDES AND LEATHER

Shortage of leather for military purposes in first six months of war — Prices
rise — First intervention of War Office in January 1915 — Conference of
Tanners in Leathersellers’ Hall — Information of probable requirements supplied
in confidence — Agreement concluded with regard to production and prices —
Heavy hides in the home market — Prices controlled by Tanners Federation —
Extension of control early in 1916 — Requisition of tanners’ output — Deter-
mining costs of production of leather — Reduction of tanners’ profits — Standard
prices for Army leather — Stocks in merchants’ hands requisitioned at different
prices based on cost price to holder — Advantages of uniform maximum price —
Allocation of leather to manufacturers — Exchange of light leather for heavy
hides from France and Italy — Prices of hides in South America.

Government purchase of tanned kips from India for upper leather, May 1916
— Supplies for civilian consumption — Curriers employed on commission —
Trading accounts analysed.

Government leather purchases in the United States — The Leather Council —
Review of Government’s policy and results of control.

In the early months of the war there were no large reserve
stocks of leather and there was soon a serious shortage of the
heavy leather required for army boots, and for harness, saddlery,
and equipment. Six months at least were needed before pro-
duction could be fully adapted to army requirements. But it
was commonly thought in 1914 that the war would be over in
a few months; and tanners were naturally reluctant to take the
risk of having large quantities of heavy leather left on their hands
at the end of the war. In consequence, the price of army leather
rose steeply during the first six months of the war, and the amount
in process of production was still insufficient to meet the needs
of the army in December 1914.

At this date a step was taken which marks the beginning of
State intervention in the leather industry. It was seen that if the
output of boots and leather goods was to be increased the War
Office would have to go behind the boot manufacturers and enter
into direct negotiation with the tanners. Fortunately the tanning
industry in Great Britain is well organized, and contains in the
United Tanners Federation a representative body with which

102 TEXTILES AND LEATHER

the Government was able to negotiate. There are not more than
about eighty large tanners in the country, so that organization
for war purposes presented far less difficulty than in the engineer-
ing or textile industries.

A meeting of tanners was convened early in January 1915,
in the Leathersellers’ Hall, and was addressed by the Head of the
War Office Boot Department. The War Office wanted to ensure
that sufficient heavy leather would be forthcoming to satisfy the
requirements of army boot manufacturers and that prices would
not be continually forced up. But it was contrary to the rules
of secrecy imposed on Government officials to disclose the total
requirements of the War Office for army equipment, and it was
impossible at that time even for the civilian head of the Boot
Department to obtain an exact estimate of the boots likely to be
required for any long period ahead. In such circumstances a less
enterprising man would have allowed things to drift, or would
at least have waited until he had received specific authority from
the Secretary of State for War to make an official statement to the
tanners as to the amount of leather the Army would require—
information which might possibly have reached the enemy and
given him valuable hints as to the size of the British Army.

Fortunately, as a business man new to official regulations, he
decided to go ahead on his own authority and risk committing
an indiscretion. The tanners said that they were ready to provide
sufficient leather and to keep prices reasonably steady so long as
they were officially informed how much would be required for
a period of six months ahead. He therefore agreed to tell them in
confidence what he estimated the Army would require. The
tanners thereupon promised to put enough hides into their pits to
produce this quantity and not to raise their prices, so long as they
were able by combination amongst themselves to prevent the
price of heavy hides rising against them. A few months later
a similar agreement was entered into with regard to the supply
and price of equipment and saddlery leather.

The price of heavy hides in the home market had risen from
Td. per lb. before the war to 14d. in the middle of 1915. When the
agreement with the tanners had taken full effect, the price of
native hides fell to 103d. per lb. This fall in the market price of

HIDES AND LEATHER 103

hides was due, not to State control, but to concerted action on the
part of the tanners taken in co-operation with the Government.
British butchers had no other market for their hides, and the
United Tanners Federation was able to induce its members not
to pay more than an agreed price. The tanners’ own organization
thus rendered it unnecessary for some time for the Government
to extend control over the British market for raw hides.

This system of indirect control lasted until the end of 1915.
Early in 1916, however, the position became more difficult. In
addition to the growing needs of the British Army, 7,000,000
pairs of boots and 6,000 tons of sole leather were ordered by
Russia, 1,500,000 pairs of boots by Italy, 150,000 pairs of boots
by Belgium, and 60,000 pairs by-Serbia. Difficulties of finance
and shipping rendered it important that Allied needs should be
supplied as far as possible in Great Britain rather than in the
United States, and in consequence active steps had to be taken
to increase the production of leather and to control prices.

The first step taken was to impose a stricter control on the
price of domestic hides, which showed a strong tendency to rise
under the influence of the largely increased demand for boots
and leather. Negotiations were opened direct with the butchers,
and the price was finally fixed at 10d. per lb., an increase of
40 per cent. above pre-war values. With the exception of seasonal
adjustments of 4d. per lb. the same level of prices was maintained
up to the end of the war. Compared with world prices this
stabilization of the price of native hides represented a saving of
well over £3,000,000 per annum in public expenditure.

The next step was to extend a closer control over the pro-
duction of sole leather. The increased military demands made
it necessary to use a wider range of leathers. An order was
accordingly made under the recent amendment of the Defence of
the Realm Regulations, requisitioning the whole output of
tanneries suitable for military purposes.

It was now possible to apply the costings system in a systematic
manner to the tanning industry, and to fix the prices of sole leather
on a sound basis. But this proved a task of great complexity.
The value of the leather produced varied according to the method
of tanning adopted, and it was accordingly necessary to fix the

104 TEXTILES AND LEATHER

relative value of some thousands of different qualities of leather.
The value of the various tannages was determined by a repre-
sentative committee consisting of three tanners, a leather mer-
chant, and three boot manufacturers, and at the same time
investigations were made by cost accountants attached to the
Department into the cost of the production of sole leather, the pro-
fits then being earned, and the normal pre-war profits in the
case of seven representative tanners. As a result of these inquiries
it was found possible to reduce prices by an average of about 4d.
per lb. compared with the prices ruling before the extension
of control. Tanners’ profits were henceforth slightly above the
pre-war standard, but considerably below what they had been
earning during the first two years of the war. Adjustments
of prices were subsequently made at quarterly intervals to meet
variations in the price of raw materials.

It was found impossible to determine the exact amount of
profit earned on army leather. Hides could not be standardized to
the same extent as other raw materials, since they ‘threw’ varying
quantities of leather suitable for military purposes. From each
hide a considerable proportion of leather unsuitable for army
purposes was produced, and the profit earned depended on the
prices realized for the unsuitable leather sold for civilian con-
sumption. It was possible, however, to ascertain the total profit
earned on military and civilian leather together, and by this means
to arrive at a reasonable basis for fixing standard prices for the
former.

In addition to requisitioning the tanners’ output it was
necessary to take possession of stocks of suitable leather in
merchants’ hands. Orders were made under Regulation 28
requisitioning all ‘ bends’ exceeding ten pounds in weight, and
later the minimum weight was reduced to six pounds. Inspectors
visited merchants’ warehouses and ear-marked the stocks of
suitable quality. Payment was made on the basis of the cost
price paid by the merchant with the addition of a normal profit.
This meant that different prices were paid varying according to
the date when the leather had been acquired by the merchant.

This step was only taken with great reluctance. The amount
of work involved in requisitioning and valuing a vast number of

HIDES AND LEATHER 105

separate lots laid a heavy burden on the official staff. An idea ot
the complexity of carrying through the operation may be gathered
from the fact that as many as 65,000 different prices had to be
calculated and scheduled separately. Requisitioning from stock
on the basis of the price actually paid by the holder was found too
cumbrous for frequent use and was avoided wherever possible
in most other schemes of control. The device which more and
more took its place was the fixing of a uniform maximum price
based on an estimate of the average cost to the holder, and then
requisitioning the whole of the stocks at the same level of prices.
This procedure was legalized by the amendment of Regulation 28
which provided that where a maximum price had been fixed the
price payable for goods requisitioned from stock should not exceed
the maximum price so fixed.

Having secured possession of the available supply the War
Office next had to arrange for the distribution of the leather to
boot manufacturers. It was here that fresh difficulties arose which
might have caused much friction and discontent, if the trade had
not been consulted and allowed to have their own way. In place
of a hard and fast rationing system under which the leather would
have been allotted as equally as possible all round, every manu-
facturer was left free, so far as circumstances permitted, to choose
the particular brand of leather to which he was accustomed. The
leather from each tannery has an individuality of its own, and boot
manufacturers and tanners alike were anxious that the usual
connexions between them should not be broken. This concession
to trade custom made it rather more difficult for the War Office
to ensure that the leather was fairly apportioned, and constant
attention had to be given to the marginal cases where supply and
demand could not be adjusted by friendly arrangement. Leather
merchants who were accustomed to act as go-betweens were still
employed, but their customary rate of commission of 4 per cent.
was reduced by War Office intervention to 2 per cent. on all
leather for army purposes passing through their hands.

Interference with the usual trade channels was thus reduced
toa minimum, and though the system did not work automatically
and necessitated close supervision to ensure that every boot
manufacturer obtained his fair quota of army leather, it worked

106 TEXTILES AND LEATHER

satisfactorily enough and caused less friction than a more system-
atically organized and logical scheme would probably have
entailed.

While arrangements were being made for regulating the
production and distribution of leather and for controlling the price
of native hides, attention was also being given to the supply of
raw material from abroad. Early in 1915 arrangements had been
made with the French and Italian Governments whereby heavy
hides which could be spared were sent to this country in exchange
for light leather needed by the Allies. Direct import of these
heavy hides on Government account was arranged with the
assistance of the Tanners Federation, and a substantial profit
amounting to over £50,000, which would otherwise have gone into
the pockets of the importer, was obtained by the War Office and
set off against the cost of army boots. Favourable terms were
also negotiated with the British Meat Companies in the Argentine
for the sale of imported hides direct to the tanners at less than
competitive prices. Finally, in February 1917, an order was made
under Regulation 2 restricting the amount which might be added
to the price of imported hides suitable for military purposes to
not more than 1 per cent. in passing from the importer to the
tanner, and persons dealing in such hides were required to obtain
a guarantee from the tanner who bought them that they would be
used for the production of the maximum quantity of army
leather.

These measures checked speculation and enabled the Govern-
ment to have first call on the available supplies. Prices in the
world market, however, continued to rise, largely owing to
American competition. The prices paid for South American hides,
which were 12d. to 13d. in 1915, rose from an average of 14d. in
1916 to 183d. in the early months of 1917. This was the highest
price paid for military purposes during the war, though the
market touched 2id. in the Argentine shortly after America
entered the war. Prices declined during the latter part of 1917
and 1918, but after the war rose steadily, until they reached the
high figure of 30d. at the peak of the boom in 1920. The consump-
tion of South American hides during the war amounted to rather
more than 100,000 hides per month compared with an average of

HIDES AND LEATHER 107

200,000 per month of native hides. These hides provided the
greater part of the raw material required for sole leather, and for
harness, saddlery, and equipment leather.

Purchase of Kups

It is now necessary to turn to the measures taken to provide
sufficient supplies of upper leather for boots. Before the war
British boot manufacturers had depended largely on Germany
and Austria, though the raw material in the form of ‘ kips’, i.e.
cow-hides, was mostly drawn from British India. . At the out-
break of war the home production of upper leather was inade-
quate, and the supply of British cow-hides available for the
purpose was reduced owing to the amount required for the manu-
facture of equipment and harness. In consequence leather
produced from East Indian kips had to be permitted in the army
boot specification. |

Before the war the price of kip leather was about 10d. per foot,
but the cutting off of foreign supplies and the growing needs of the
Army forced the price up by 60 per cent. by the end of 1915. When
early in 1916 the heavy demands of the Allies were added to the
increasing army requirements, the situation became menacing.

Partly in order to check speculation and reduce prices, but
mainly in order to make sure that sufficient supplies would be
forthcoming, the War Office decided in April 1916 to purchase
and import kips on Government account, employing the Govern-
ment of India as its agent for buying from Indian tanners. The
advantages which it sought to obtain were, first, to eliminate
speculation and regulate prices; secondly, to control the cost of
shipping, handling, and dressing the hides; and thirdly, to deter-
mine the uses to which the hides should be put, and the distribution
of the resultant leather.

At first Government purchase was confined to kips suitable
for military purposes, namely, East Indian tanned kips of 6 lb.
and upwards and Bangalore tanned kips of 7 lb. and upwards.
All kips not actually in process at the date when the scheme started
were taken over at prices based on the market prices ruling between
May 6 and 11, 1916. But in a short time the market price of
inferior kips not required by the War Office rose above the prices

108 TEXTILES AND LEATHER

paid under the Government scheme, and tanners in India had
a strong inducement to deal only with these inferior grades.
Consequently the War Office authorized the Government of India
to buy the whole production of kips on the same basis of values.
Those that were unsuitable for military purposes were sold to
tanners for the civilian trade, and the profits realized were credited
to Army funds. Part of the leather produced from suitable kips
was also sold for civilian consumption. In June 1917 inferior
kips were selling at 32d. per lb. in public auction, while the price
paid by the War Office was 163d. per lb.

The methods adopted for buying, dressing, and allocating
the kips were similar to those later adopted in the case of Colonial
wool. The Government of India supervised purchases in India,
employing selected merchants to buy from the producers and
resell to the Government at fixed prices. The kips were shipped
in requisitioned freight at Blue Book rates as Government stores,
and on arrival in Great Britain they were handled by the usual
importing houses for a commission of $ per cent. on the value.
War Office experts inspected each consignment and determined
the destination. About two hundred firms of curriers were
employed as agents for dressing the kips and manufacturing
them into leather under the directions of the War Office. They
were paid a commission for their services, depending partly on the
quality of leather they produced, and had to account for all the
leather produced as Government property. After further inspec-
tion and selection the leather was delivered to boot manufacturers
engaged on Government contracts. The manufacturer was
debited with the value of the leather received and the Department
was finally rembursed by deduction of the value of the leather
from sums due to the contractor for the finished boots.

While upper leather made from controlled British cowhides
was costing in the middle of 1917 21d. per foot, or 40 per cent.
above the pre-war value, kip leather was obtained under the above
scheme at 12d. per foot, compared with about 10d. per foot before
the war and 16d. per foot before the scheme was introduced in
May 1916. In addition to this large saving, amounting to nearly
£2,000,000 in 1917, a substantial trading profit was realized on
kips and leather sold for civilian purposes.

HIDES AND LEATHER 109

In 1917 the scheme was extended to cover raw kips, as well
as rough tanned kips, partly in order to supply the requirements
of the Italian Government. Further Government purchases of
hides were also made in British East Africa and in New Zealand.

The trading accounts issued after the war show that large
stocks of kips amounting to 105,000 bales remained unsold on
March 31, 1919. This was primarily due to shipping restrictions,
which made it necessary to hold back supplies of kips unsuitable
for military purposes. At one time it was feared that these unsold
stocks would result in a loss. But the general rise in price of all
classes of leather during the boom years of 1919 and 1920 enabled
the Government to dispose of its surplus at a good profit.

The total expenditure on the Kips and Raw Hides Account for
the three years 1916 to 1919 was £23,542,000. The total profits
shown in the balance sheet of March 31, 1919 was £1,815,688, in
addition to a credit balance of £650,000 on account of War and
Marine Risk Insurance.

In addition to purchases of kips and hides the War Office found
it necessary to buy sole leather and upper leather in the United
States. In February 1917 private imports of leather from the
United States were prohibited owing to considerations of finance
and shipping, and such limited quantities as were necessary for
military purposes were purchased on Government account. After
the Armistice large purchases of upper leather were made for the
sake of assisting the industry to recover its normal home and
export trade. Supplies amounting to forty million feet were
obtained at prices which would have enabled the Department to
resell at a profit of 50 to 80 per cent. when the leather arrived in
Great Britain. But on the recommendation of the Leather
Council and in order to benefit the consumer by means of the War
Time Boot Scheme the selling price was fixed at a small margin
over cost.

On the administrative side an important part in the develop-
ment of control was played by numerous committees and sub-
committees, on which the various sections of the trade, including
both employers and employed, were represented. A full list of
these committees as they existed in the middle of 1917 is given
in Appendix 6.

110 TEXTILES AND LEATHER

In 1918 the Central Advisory Committee was expanded and
transformed into a Leather Council, which became the responsible
body for formulating policy in regard to control of the civilian
trade. In November 1918, at the request of the United States
Government, an Inter-Allied Leather and Hides Executive was
set up in Washington for controlling supplies and distribution in
the world market. But soon after the Armistice the Executive
was abandoned.

In summarizing the chief features of boot and leather control
reference must be made to the important part played by existing
trade organizations, in particular the United Tanners Federation
and the Boot Manufacturers Federation. Not only did these
bodies facilitate the measures of control which the Government
was compelled to take, but to some extent, as in the case of
native hides, they rendered Government control in the form
of direct purchase and allocation unnecessary. In the Report of
the Director of Army Contracts dated June 1917 the relations
of the Government and the industry are described in the following
words :

The policy of the Department has been to unload on the trade itself
a large portion of the responsibility for dealing with difficulties which are
of serious importance not only to the supplies of the Allied Armies, but
also to employers and labour in the trade, and which depend very much
for their solution on the intelligent co-operation of trade and labour
organizations as well as of individual firms. The smoothness with which
the elaborate organization of the leather trades has worked, and the ready
co-operation which has rendered possible the large changes in methods
of trading and production, afford ample justification for the policy.}

In the Report on Raw Materials issued after the war in May
1920, the close co-operation between the leading men in the
industry and the Government is again emphasized, and the
advantages of control to the trade itself as well as to the com-
munity are shown by the fact that there was no desire on the part
of the leather trade to see State control liquidated too rapidly
when the war was over. The President of the Tanners Federation
* was at first of opinion that International Control of Raw Materials
for two years after the cessation of hostilities would be extremely
desirable ’.?

1 Cd. 8447, 1917, p. 20. 2 Omd. 788, 1920, p. 18.

HIDES AND LEATHER 111

This attitude, which was contrary to the usual attitude of
merchants and manufacturers towards State intervention, is
largely explained by the corporate feeling already existing in the
industry and the degree to which the trade itself participated in
the administration of control. As the same Report points out,
the Department was always reluctant to enter into trading ; its
sole object was to assist the leather industry to give its maximum
contribution to war needs; private enterprise was encouraged
wherever possible to meet the needs of the situation, and ‘ where
purchase was undertaken or manufacture directed by the Depart-
ment, it was in the opinion of competent advisers necessary for
the Department to intervene to meet a situation with which
private enterprise for one reason or another was unable to cope’.

To some extent also control was facilitated by the smaller
scale of the industry. The number of tanners, curriers, manu-
facturers, factors, and importers was not so large as to make
personal contact and individual attention impossible. The official
machine did not descend from the skies like some malignant
Providence, whose inexorable decrees outraged common sense
and evoked feelings of helpless wrath or righteous indignation.
Control was exercised by personal influence as much as by statu-
tory powers; and if the powers wielded were autocratic, the
administration of them was tempered by a large measure of
popular consent and responsible self-government.

It is perhaps for this reason that the reaction from the idea of
association and co-operation since the war has not gone so far
in the boot and leather trades as in most industries. The war
period left a stimulus towards improved methods of production
and towards a better understanding between employers and
workers which has not been entirely effaced by the post-war
depression. If industry is ever organized in such a way as to
reconcile the conflicting interests of employers, workers, and
consumers, the boot and leather trades will possibly be one of
the first to reach that goal.

CHAPTER X
THE POLICY OF WOOL PURCHASE

Consumption of wool for military purposes — Figures for blankets, flannel,
and khaki cloth purchased by the War Office — Restrictions on export — First
attempt to introduce costings — Review of wool trade at beginning of 1916 —
World scarcity foreseen — Necessity of safeguarding supplies and controlling
prices — State purchase of British wool decided June 1916 — Negotiations with
Dominion Governments — Purchase of entire clips of Australia and New Zealand,
November 1916 — Advantages of centralized purchase — Standardization of
prices and qualities — Methods of distribution and sale — Hardships inflicted —
Elimination of middlemen.

THE experiments in State control which have been described
hitherto were on a modest scale compared with the task which
confronted the War Office in dealing with the woollen and worsted
industries. Manufacturers in other industries had accepted the
new costings system with a good grace, while manufacturers and
merchants in the woollen and worsted industries were still being
allowed to make unrestricted profits. But the privileged position
of the wool trade did not last long. Within ten months from the
first application of the ‘ costings ’ principle in Dundee, preliminary
measures of control had been introduced, and from that time
onwards restrictions in the woollen and worsted industries became
more and more severe, until finally the position of the jute and
flax manufacturers began to appear by comparison almost
favourable.

Attempts to regulate prices began with the early negotiations
with the Wholesale Clothiers Association to which reference was
made in a previous chapter. Prices for uniforms could be
standardized because the clothing manufacturer obtained his raw
material, khaki cloth, not in the open market but from the War
Office at fixed ‘issue’ prices. But though competitive tendering
was thus abandoned in the clothing trade, the process could not
at that time be carried farther. The War Office had to buy its
khaki cloth in the open market in competition with purchasers
of other cloth for civilian and export requirements. Prices steadily
rose, but there was not during the first two years of the war any

THE POLICY OF WOOL PURCHASE 113

serious difficulty in getting supplies. Pressure was brought to
bear on as many firms as possible to manufacture khaki cloth, and
for two years the demands of the army for khaki were successfully
met without any more drastic interference than restrictions on the
export of cloth suitable for military purposes and of certain
qualities of raw wool and yarn.

The position with regard to raw wool up to the beginning of
1916 was satisfactory. On the outbreak of war, the cessation of
a large part of the Continental demand and the general paralysis
of trade affected the wool trade like all others, but the recovery
wasrapid. The requirements of raw wool for the army, which in
peace amounted to less than | per cent. of the wool supplies of the
United Kingdom, increased to 20 per cent. of the total consumption
in three months. From that time onwards the demand for wool
for the British and Allied armies steadily increased, until in 1917
it reached a level which closely approximated to the total pre-war
consumption of the United Kingdom.

A few figures will show the vast scale of military requirements.
The average number of blankets supplied to the army during the
last three years before the war was 165,650. The average for the
first three years of war was 11,708,430, or seventy times as great.
Before the war about a million yards of khaki cloth and a million
yards of flannel satisfied the army’s annual demand. During
the war the total orders placed for khaki cloth (including purchases
made in this country for the Allies) amounted to 313 million yards ;
and the quantity of flannel bought reached 276 millon yards.
164 million pairs of socks were bought for the British and Allied
armies.”

Foreseeing that its requirements would necessarily be on avastly
greater scale than in times of peace, the Government pursued
a cautious policy in regard to raw wool exports. Already in the
autumn of 1914 crossbred wool, which is specially suitable for
military purposes, was not allowed to be exported, except occa-
sionally to the Allies. At the same time, exportation of Australian
wool to America (as well as to enemy countries) was prohibited by
the Commonwealth Government in the belief that Germany was
buying in the United States. In March 1915, however, after wool

1 Cd. 8447, 1917, p. 13. 2 Omd. 788, 1920, p, 24.
1569.53 I

114 TEXTILES AND LEATHER

had been declared contraband of war, this restriction was partially
removed.

The result of these measures was that in 1915 900 million Ib.
of wool were retained in the United Kingdom, compared with
an average pre-war consumption of 550 million lb. per annum.
The rate of consumption, though it increased considerably during
1915, did not increase in the same proportion as the supply ; and
many traders carried over heavy stocks of raw material from 1915
to 1916. Export restrictions were relaxed; merino wool was
exported freely except to prohibited destinations, and crossbred
wool and tops were released more liberally both to the Allies and
to certain neutrals.

At the beginning of 1916, as the result of the steady rise in
price of woollen and worsted goods and the experience gained in
the jute and leather industries, consideration began to be given
to the possibility of introducing the ‘ costings’ principle and
controlling the prices of subsidiary materials. The new amend-
ment of the Defence of the Realm Regulations, passed in February
1916, enabled the Department to requisition output on the basis
of cost of production and fair profit, to require particulars to be
furnished as to output, cost, and profit, and to verify them by
examination of books. Skilled accountants were appointed and
made test examinations of the books of typical firms. Committees
were set up in different sections of the trade, and experts in the
trade were appointed as whole-time officials of the War Office to
assist in negotiating agreed conversion costs for the various stages
of manufacture.

Much useful information was obtained in this manner. In
particular it was demonstrated that manufacturers’ own state-
ments as to cost and profit could rarely be trusted, not so much
because of any conscious desire to mislead but because they hardly
ever had exact information on the question themselves. The
keeping of cost accounts as a means of checking the efficiency of
management and promoting economy was almost unknown in the
woollen and worsted industries before the war. The examination
also showed that here, as in the jute trade, the biggest profits were
going to the spinner. The machinery best adapted for spinning
yarn suitable for military purposes was not sufficient to meet the

THE POLICY OF WOOL PURCHASE 115

full demand of the cloth manufacturers ; their potential capacity
for weaving khaki cloth was greater than that of the spinners to
spin khaki yarn. Karly in 1916 it was ascertained that a spinner
of worsted yarn was making 5d. per Ib. net profit compared with
a normal maximum in pre-war years of 13d. per lb.

By means of these investigations reductions in price were
obtained in certain directions, but it soon became clear that in the
excited state of the market for raw wool and tops it was impossible
to devise a satisfactory costings system. Spinners and manu-
facturers had bought and were buying their raw material at
varying prices from time to time; to attempt to average out the
cost of several deliveries of wool or yarn purchased at different
times would have meant that a different basis would have had
to be applied to each manufacturer. The only common basis
which could be taken was the market price of the day, which in
the excited state of the wool market during the first two years of
the war, almost always meant the highest price hitherto reached.
This meant that manufacturers who had bought some time
previously realized very large profits beside which the reductions
effected by paying on the conversion cost system would be almost
insignificant. Furthermore, there was no guarantee that the price
of raw material had reached its highest point ; in fact there was
every reason to suppose that it would continue to rise. It was soon
realized therefore, as indeed had already been learnt at Dundee,
that a satisfactory costings system could only be introduced when
the Government controlled the price of the raw material and its
products through all stages from start to finish.

Meanwhile the need for controlling the raw material was
becoming evident on other grounds also. The economic investi-
gation of supplies, prices, output, trade organization and other
relevant information had been entrusted to a statistical branch of
the newly established Raw Materials Section. A census of stocks
of raw wool and tops in the country including those in the hands of
manufacturers was taken early in 1916. Information was also
obtained under compulsory powers which presented for the first
time a complete picture of the machinery, labour, productive
capacity, and output of the entire industry. Statistics and charts
were prepared illustrating the world movements of supplies and

12

116 TEXTILES AND LEATHER

prices, based on the best information obtainable by the Govern-
ment from trade and official sources. The result was that in a short
time the War Office had a more complete grasp of the situation as
a whole than any private trader could possibly have. It could com-
pare the supplies in sight with its own ascertained and estimated
requirements ; it could compare the tonnage required with the
tonnage likely to be obtainable. By means of copies of commercial
cables supplied daily by the cable censorship, it could follow the
currents of supply and demand throughout the world, learn the
views taken of the situation by traders in all countries, and get
timely warning of anticipated future demands. Lastly, it had
obtained by its census of stocks in the country a reasonably
accurate knowledge of the hidden reserves on which the future
course of prices so much depended, and detailed information as to
the quantity and quality of wool, which would if necessary be
available for military purposes.

The result of these statistical and economic researches was to
show that at the moment supplies in the United Kingdom were
relatively abundant, owing to the large carry-over from 1915, but
that there was a grave prospect of world shortage in the near
future. For some time traders were misled by the existence of
large stocks into thinking that the position gave no cause for
alarm. But a survey of the whole position revealed the following
disquieting facts.

In 1916 the world’s production had decreased by about 20 per
cent. or 300 million lb. compared with 1914. A serious drought in
Australia during 1914-15 had reduced the number of sheep from
82 millions to 69 millions. At the same time wool production was
falling off in South America owing to the competition of cattle
raising and wheat growing. While supply had decreased, demand
was increasing. The Japanese were actively buying in Australasia,
and the United States were beginning to import wool on a scale
never before reached. American import duties on wool were
removed shortly before the war, and as a result during 1915-16
the United States purchased nearly ten times the amount of her
average purchases of Colonial wool during the three years prior
to the war.

The following table shows the changes in the distribution and

THE POLICY OF WOOL PURCHASE 117

value of Australasian and Cape wool in world markets during
the years 1913 to 1916.1. These wools represent about 70 per cent.
of the world’s exportable surplus.

= Imported
xports to Europe | Average 1 : into
and America value eect United
(bales) per bale ; Kingdom
£ (bales)
2 \ United
Australasian} Cape Kingdom Europe | U.S.A.

1913 96,000 | 484,000

2,2 164 1,043,000 | 1,675,000 | 54,000 | 1,646,000
1914 2,332,000 | 499,000

2,1

1,9

17 968,000 | 1,689,000 | 169,000 | 1,601,000
iG) 1,923,000 | 212,000 | 551,000 | 2,171,000
27 15384,000 | 273,000 | 720,000 | 1,496,000

1915 57,000 | 519,000
1916 19,000 | 500,000

The earliest attempts of the Government to protect itself had
been by means of restrictions on export of raw wool and tops.
This policy had been pursued intermittently since the beginning
of the war, but it had been unsuccessful in putting a stop to the
rise in prices. The chief reason was that since the embargo was
removed to a limited extent whenever the position with regard
to supplies in sight seemed to justify its removal, foreign buyers
continued to purchase in the London market in anticipation
of obtaining a licence to export. Though licences to export the
full amount purchased on foreign account were never granted,
this did not deter the foreign buyer. He argued that he stood at
least as good a chance as anybody else of getting a licence sooner
or later, and that even if he failed, the value of his property was
continually appreciating and he could always resell at a profit
when he was tired of waiting for a licence.

It was a long time, however, before the advocates of restrictions
on export realized that their policy was inadequate. Most of the
officials concerned, and the trade advisers almost without excep-
tion, held that it was the only practicable method of intervention ;
they argued that so long as the Government maintained sufficient
supplies in the country, it was neither possible nor desirable to
fix prices or to stop speculation. In spite, therefore, of weighty

1 Economist, February 17, 1917.

118 TEXTILES AND LEATHER

arguments in favour of Government purchase of raw material on
grounds of economy in expenditure and stabilization of prices,
this extreme measure would never have been taken if the Cabinet
had not been convinced that there was an actual danger of the
Allies running short of raw material for clothing the armies.

At the beginning of June 1916, when the British wool season
usually opens, the Cabinet had become seriously concerned at the
rapid increase in price, the unaccountably large purchases by the
United States and the danger of the Allies running short of
essential supplies. The position had been discussed with the
Prime Minister of Australia, who had expressed his willingness to
take control of supplies and prices in Australia, but urged that
he could hardly be expected to take any steps in this direction
until the British Government had applied similar measures to
British wool. The original plan was to purchase only the wool
actually required for clothing the British and Allied armies.
Since the home-grown clip was in the main of a kind suitable for
this purpose, the Cabinet therefore decided to requisition the whole
of the domestic wool clip. It was hoped that if the Government
could obtain possession of a considerable proportion of crossbred
wool suitable for military purposes it might be in a position to
dominate the market and avoid the necessity of going further and
having to buy Colonial wool as well. At this time the proposal
that the Government should become the sole purchaser of wool
for civilian as well as for military needs found little support.
On June 8, 1916, an Order was accordingly issued prohibiting all
dealings in British wool, and during the following two months
machinery was rapidly improvised for State purchase of the
domestic clip. The methods by which British wool purchase was
organized are described in the next chapter.

Colonial wool purchase

By the autumn of 1916 British wool purchase had been
successfully launched, and the machinery set up for the dis-
tribution of British wool to manufacturers was working smoothly
enough to encourage the War Office to embark on the purchase
of Colonial wool. The British clip constituted only one-ninth
of the British consumption of wool in 1915. Negotiations were

THE POLICY OF WOOL PURCHASE 119

accordingly opened with the Australian and New Zealand Govern-
ments for the purchase of their crossbred clips, which amounted
to about two-fifths of their total wool production and were
specially suitable for military purposes. The Dominion Govern-
ments replied that it would be unfair and impracticable to dis-
criminate between the growers of different kinds of wool, and
offered to sell the entire clips, both crossbred and merino. There
was a natural hesitation on the part of the Cabinet to embark upon
such a huge transaction. The estimated value was £22,000,000
for the unsold balance of the Australian clip and £13,000,000 for
the New Zealand clip, none of which had been sold. But since the
purchase of merino wool was likely to prove a profitable trans-
action, the Imperial Government finally decided in November,
1916, to take the whole clips, the basis of price being mutually
agreed upon at 55 per cent. above the average 1914 prices. On
this basis the Australian clip worked out at an average of 154 per lb.
It was also agreed that half the profit realized on the sale of wool
for other than military purposes would be returned to Dominion
Governments for distribution among the growers. The level of
prices fixed was about 10 per cent. below that ruling in the open
market at the time, but the arrangement was satisfactory to the
growers because it relieved them of the risk of a slump in prices
owing to the scarcity of tonnage. The detailed work of collecting,
valuing, and paying for the wool was left to the Dominion Govern-
ments. Funds were provided by the British Government on
receipt of cable advices of the amount purchased from time to
time. The provision of the necessary tonnage was arranged by
the Ministry of Shipping.

In this manner a transaction unprecedented in the history of
the wool trade was carried through bythe exchange of half a dozen
cables in the course of a fortnight. The audacity of the War
Office astonished the trade. In order to avoid speculation and
price fluctuations while negotiations were in progress the strictest
secrecy had been observed. About five hundred cables relating
to wool were held up by the Postal Censorship during the critical
fortnight and were only released after negotiations had been
concluded and private purchases and sales were no longer possible.
In spite of the rumours circulated from time to time few had

120 TEXTILES AND LEATHER

expected that the Government would act in so swift and drastic
a manner. Fewer still at that time were prepared to admit that
there was any necessity for so high-handed a proceeding. But
when a few months later, in spite of the scarcity of tonnage,
manufacturers found that they were guaranteed a regular supply
of raw material at a steady price fixed for periods of six months
at a time, they began to realize the advantages of State purchase,
and had to admit that in this instance the Government had acted
with unusual foresight.

In the middle of 1917 the contract was extended for another
year without change, and at the end of that year 110,000 bales of
South African wool were bought on the same terms from the
Union Government. In 1918 further contracts were made with
Australia and New Zealand for the purchase of their entire clips
at the same price until the expiration of one year after the end
of the war, which was later interpreted to mean up to June 30,
1920.

The official view of these transactions is contained in the
following extract from the Report of the Director-General of Raw
Materials published in 1920 : !

There can be no question that these successive contracts with Australia
and New Zealand were wise and statesmanlike measures at the time they
were made, and have worked out to the advantage of all the contracting
parties. It was an immense advantage to the sheep farmers of both
Dominions to have secured to them the purchase of all the wool as soon
as it was shorn at a schedule of prices fixed on a remunerative basis. They
were thus relieved of all the anxieties connected with the war situation
and with the critical condition of ocean traffic. Great accumulations of
wool took place owing to the difficulty of providing sufficient steam tonnage
during the submarine campaign, and the course of prices when the war
should end was unknown. Great Britain on her part received com-
pensating advantages. The control of a sufficient quantity of wool
suitable for military purposes was essential for the efficiency and security
of the Supply Departments, and it is admittedly the case that from 1917
onwards, wool could not have been obtained, from foreign sources so
cheaply as it was secured by the requisition of the British clips and the
purchase by contract of the Australian and New Zealand clips.

Under the arrangements made for Imperial purchase the
Australian and New Zealand Governments prohibited the sale
1 Omd, 788, p. 12.

THE POLICY OF WOOL PURCHASE 121

and shipment of wool on private account and set up their own
organization for the purchase of the clips direct from the growers.
In Australia the Government appointed a Central Wool Committee
at Melbourne and local wool committees in the various States ;
farmers were required to consign their wool to one or other of the
ports of shipment where it was valued by an official valuer. In
New Zealand the organization of purchase was undertaken by the
Department of Imperial Government Supplies at Wellington. In

order to guide the official valuers a schedule or ‘ bareme’ was
_ drawn up, and standard samples were set aside for all recognized
qualities of wool. In Australia the official ‘ bareme’ at first
contained about three hundred different qualities but was later
expanded to include about a thousand. The whole of the Austra-
lian clip was thus classified into standard grades and every bale
was marked with the number corresponding to its respective
quality in the schedule.

The standardization of prices and qualities in the Dominions
simplified the task of distribution in Great Britain. The normal
custom is for wool to be exhibited in large warehouses in the Port
of London, where they are split open and inspected by the buyers
before the London wool sales open. Under control a large pro-
portion of the colonial shipments were consigned direct to manu-
facturers without passing through the London sale-rooms. A large
warehouse was opened by the War Office in Bradford, where
standard samples, each marked with its appropriate number,
were exhibited. Manufacturers then came and selected the sample
they preferred and after a time were able to order their raw
material by merely specifying the standard number. ‘This system
of selling ‘on description’ proved satisfactory enough for the
production of standard lines of goods and was a source of
important economies in the handling and transport of wool.

In December 1916 great consternation was caused in the trade
by the announcement that the London wool sales would be sus-
pended. The Government was now in possession of the greater
part of the supplies and was therefore in a position to regulate
both prices and distribution. It was decided that wool should go
first to Government contractors, secondly to manufacturers for
the export trade, and thirdly for essential home requirements in

122 TEXTILES AND LEATHER

order of priority. It had also been decided with the approval of
manufacturers that wool should be issued at fixed prices for
a period of at least six months, in order to encourage trade and
enable manufacturers to compete advantageously in foreign
markets. It was obviously impossible to carry out this policy
and at the same time continue the system of selling wool by
auction, under which the raw material would go to the highest
bidder without regard to the use to which it was to be put.

But an ingenious compromise was eventually arrived at.
Though the auction sales were suspended and the bulk of the wool
was distributed direct, a use was still found for the London wool —
brokers’ organization. Certain classes of wool were distributed in
the London sale-rooms not by auction but by allocation at fixed
prices to licensed buyers. Licences to buy were issued only to
manufacturers, who might employ merchants to buy for them as
agents on commission ; but merchants were not allowed to buy on
their own account for speculative purposes. The London wool sell-
ing brokers pooled their businesses and formed a single agency for
distributing wool on behalf of the Government. When a sale was
to be held the committee of London wool-selling brokers adver-
tised the lots that would be available and the prices at which they
would be sold. Licensed buyers would attend at the hour stated,
and as each lot was put up they would simply hold up their hands
instead of bidding a price. The broker would then knock down
each lot to one of the applicants, endeavouring as far as possible
to give each man a turn. In this way all the buyers stood an
equal chance of getting what they wanted sooner or later. Such
was the reputation for impartiality which the selling brokers
enjoyed, that the new system of auction at fixed prices worked
surprisingly well. The buyers were satisfied that everything was
done fairly and the sales took less time than when competitive
buying prevailed.

The system of centralized purchase and distribution at fixed
prices adversely affected a large number of wool merchants and
importers. It was a serious hardship that they should be entirely
excluded from the Colonial wool business, and they made the very
natural request that they should be allowed to handle as much
wool as they had been accustomed to buy in previous years. This

THE POLICY OF WOOL PURCHASE 123

request the War Office, in accordance with its general principle
of not paying commission for services which were unnecessary,
was compelled to refuse. In its normal business of buying for the
Army the Contracts Department was always trying to eliminate
the middleman and to reduce the number of channels through
which goods had to pass. The Public Accounts Committee of the
House of Commons might have criticized the officials severely, if
they had allowed a firm to receive a commission merely on the
ground that it was the custom of the trade and that it would be
a hardship to cut across established trade connexions. When,
however, this principle was applied to the purchase and distribution
of the entire raw material of an industry, other considerations
besides a rigid regard for economy were bound to carry weight.
A question of general principle arose, on which the Cabinet, if it
had had time, might well have issued an authoritative pronounce-
ment. When the State undertook centralized purchase and dis-
tribution, should the policy be to do this as economically as
possible by employing a small salaried staff in a central office, or
to maintain the existing channels of trade intact in order not to
weaken the position of existing firms and to destroy their con-
nexions and goodwill? In the absence of any authoritative
ruling on this question the officials administering control were
often faced with the dilemma of either pursuing the path of least
resistance and employing firms for services which were not really
necessary, or of endeavouring to save expense and _ thereby
inflicting loss on important trade interests.

’ The total administrative expenses for the distribution of
Colonial wool up to March 31, 1919, was one-fifth of 1 per cent. of
the total sales. A dozen or so experts and about a hundred
ledger clerks were sufficient to look after the distribution of
over a hundred million pounds’ worth of imported wool. The
irony of the situation was that many of the aggrieved firms
attacked the Government, not for economizing at their expense,
but for extravagance in setting up new offices and engaging
‘hordes of officials ’ to do what could be done more cheaply and
efficiently through the usual trade channels. At the Ministry of
Food a different policy prevailed. Wherever possible every firm
engaged in the trade was guaranteed a share of the business under

124 TEXTILES AND LEATHER

control. The practice of the War Office in eliminating the middle-
men and creating a new central organization to take their place
was not widely followed.

To those in a position to know the facts the real objection to
State control of wool and other raw materials was not its extra-
vagance but its ruthless economy ; for the immense savings in
public expenditure which it effected were often incompatible with
what were regarded as the ‘ legitimate expectations ’ of private
traders.

CHAPTER XI
BRITISH WOOL PURCHASE

Preliminary difficulties — Variety of trade customs — Scottish wool trade —
Organization of trade in England — Special conditions in Ireland and Wales —
Plan adopted in Great Britain — Price and valuation — Wool areas and local
staff — Local and Central Advisory Committees — Authorized merchants —
Allocation of Clips — Methods of purchase — Complaints — Skin wool — Manx
wool — Free carriage — Distribution and sale — Trading accounts.

Tue decision of the War Office in June 1916 to purchase the
entire wool clip of the British Isles was regarded in many quarters
with grave misgiving. The experts were doubtful whether any
scheme of State purchase would prove feasible. Farmers and
sheep breeders were suspicious, and many wool merchants were
so convinced of its impossibility that they confidently expected
the decision to be reversed. If there had been no one in the trade
prepared to assist the Government, State purchase would have
been impossible; but as generally happened during the war,
once the Government had decided that State intervention was
necessary, it was soon able to obtain the whole-hearted services
of some of the ablest men in the trade under the vigorous leader-
ship of Col. F. V. Willey, C.M.G., M.V.O.

It was not an easy task, however, even for men with a life-long
experience of the wool trade to devise a workable scheme of State
purchase. Customs varied widely in different parts of the country.
The wool trade, like other businesses, is so specialized that there
was no single man equally familiar with the whole field, who
could give a comprehensive account of the various channels of
trade and customary practices all over the country. Those who
knew most were least able to suggest simple and uniform lines
of organization to take the place of the existing variety and
complexity. Three main alternative plans were examined.
First, to establish Government depots in convenient centres, to
which farmers would be required to send in their wool for valuation
and purchase by salaried Government buyers. Second, to employ
wool merchants as Government agents for buying in the usual

126 TEXTILES AND LEATHER

way from farmers. Third, to leave wool merchants free to buy
on their own account and at their own risk, and to take over all
wool so bought at an official valuation, thus centralizing wholesale
distribution, but not ‘ retail’ collection, in the hands of the State.
Each of these three alternative plans was rejected as unsatis-
factory if applied universally, and the scheme eventually adopted
was a compromise designed to suit varying circumstances. ‘The
necessity for this will appear from a brief description of the normal
methods of buying and selling in force in different parts of the
United Kingdom.

In Scotland the general custom was for farmers to consign
their wool to large wool brokers in Glasgow and Edinburgh, where
it was sold by auction either direct to manufacturers or to Brad-
ford wool merchants ; after the sale the broker remitted the price
to the grower less his usual commission. The broker was not
a buyer on his own account and therefore did not require to be
an expert valuer ; nor owing to the greater uniformity of Scottish
wool, which is for the most part ‘ blackfaced ’ or ‘ cheviot ’, was
there any necessity to grade or ‘ case’ the wool as in England.

The plan for State purchase in Scotland followed the same
lines, the only difference being that instead of the value being
fixed by the competition of buyers at auction it was fixed by
a Government valuer according to an official schedule. The
Scottish wool brokers carried on as before, but received their
remuneration from the Government and not from the farmers.
This was the simplest system and corresponded most closely to
the plan of having wool consigned to central Government depots.

In England the system of sending wool on consignment for
sale in the London market had never made much headway. The
English farmer has a rooted objection to parting with his property
before he has pocketed the cash, and has a special objection to
sending it long distances to a large place like London, where he
thinks it might get lost. This gives the small dealer his oppor-
tunity. In some parts of England farmers took their wool to
the local market town, where it was sold by auction at a wool
fair attended by buyers from all over the country. Where this
system was in vogue, it was easily adapted to a scheme of Govern-
ment purchase. All that was necessary was for the auctioneer

BRITISH WOOL PURCHASE 127

. to arrange a certain day on which all the farmers in the neigh-
bourhood would be invited to send in their wool. It was then
valued, paid for, and packed by experts employed by the War
Office, and the whole process was complete in a day. Unfortun-
ately, however, wool auctions were confined to only a few counties,
mostly in the south and west of England. Elsewhere farmers
had a feeling that they were cheated at auctions and that the
system encouraged the buyers to make a ring to keep down
prices. But whatever the reason the auction system was not
sufficiently widespread to become the pivot of a Government
purchase scheme, as the advocates of the first plan had hoped.

The normal practice in England and Wales was for the farmer
to sell his wool on his farm, either to a Bradford wool merchant
or to a local country dealer. Agents and employees of the large
Bradford firms, including a few manufacturers who preferred to
buy direct, travelled round the country negotiating for individual
clips. Under this system the farmer was convinced that he could
make a better bargain than in any other way, though the expense
of keeping a large number of separate buyers joy-riding over
rural England had to be paid for by somebody and was not likely
to be deducted from the merchant’s profit. A possible explanation
may be that the English farmer, unlike the canny Scot, prefers
the social pleasure of bargaining to the more austere delight of
realizing the highest price for his produce. This idiosyncrasy
made a modification of the second plan necessary in England.

InIreland the method of collecting wool was at a still lower level
of organization than in England. In most parts of the country
it was bought by general dealers or ‘ gombeen men’, who often
obtained it not for cash but by a system of barter or in settlement
of a debt. In such transactions neither party needed to display
much knowledge of quality or value. The local dealers would
in turn sell to a few large wool merchants, mostly situated in
Dublin and Belfast, who cased the wool and re-sold it to Bradford
manufacturers. Irish woollen manufacturers also bought locally
either direct from farmers or from dealers.

The Welsh wool trade occupied an intermediate position
between Ireland and England. A large number of small dealers
were in the habit of buying wool, but many of them were without

128 TEXTILES AND LEATHER

expert knowledge and proved themselves incapable of valuing.
wool correctly.

The chief difference between the English and the Irish schemes
was that in England the War Office bought direct from the farmer,
employing the usual wool buyers as agents. In Ireland it was
clearly impossible to employ all the storekeepers and ‘ gombeen
men’ as authorized agents of the British War Office. Even to
take a census of wool in Ireland was found impossible. For a
time the Order prohibiting dealings was openly defied, and even
Bradford wool merchants took it for granted that the British
Government would never be able to organize wool purchase in
Ireland. It was here that the third plan above mentioned was
found useful. With the aid of the Irish Department of Agriculture
a satisfactory scheme was soon evolved. Export of wool from
Ireland was prohibited except on Government account. Sixteen
of the largest firms in Dublin and Belfast were appointed Govern-
ment agents and local dealings were allowed to go on unrestricted,
though Irish manufacturers were only allowed to buy under
special licence. The prices which farmers were entitled to receive
were posted up all over Ireland. The local dealer bought at his
own risk and could only sell either to the Government agents or
to licensed manufacturers. If his valuation was neither too high
nor too low he could count on making jd. per lb. profit, which
was allowed in the price paid by the Government agents. Since
the bulk of the clip was normally exported the Government was
able to control a comparatively narrow ‘bottle neck’ at the
ports, and the leakage by irregular purchase by small manufac-
turers was never serious. One reason perhaps why this scheme
worked so smoothly in Ireland was that the Irish farmer had
rarely obtained the full market value of his wool and that when
the Government posted up fixed prices corresponding to those
ruling in England he was less easily exploited by the local dealers.

In England and Wales direct purchase from the farmer was
the only way of getting physical possession of the entire clip and
preventing leakages. This necessitated a more elaborate organiza- '
tion, which took some time to get into working order. All wool
merchants of good standing were employed as Government agents
for the collection of wool from the farmers whose clips they had

BRITISH WOOL PURCHASE 129

purchased in the previous year. Their operations were controlled
by District Executive Officers appointed by the War Office in each
of the main wool-growing areas and responsible to a Chief Execu-
tive Officer in London. A schedule of fixed prices, lower. than
the market rates previously ruling, was drawn up for all the
various classes of wool. A Central Advisory Committee on wool
purchase was set up in London, and Local Advisory Committees
were appointed in each area to assist the District Executive
Officer.

In July a census of the 1916 clip was taken, in which every
farmer was asked to state the quantity and description of his
wool and the name of the buyer to whom he had sold it in 1915.
These returns were tabulated in the offices of the District Executive
Officers, who then proceeded with the advice of the Local Advisory
Committees to allocate the clips to the wool merchants who had
been appointed Government agents. After the wool had been
‘cased’, or sorted into classes, by the authorized agent, the
District Executive Officer inspected it, and the payment due to
the farmer was made by the Financial Branch of the War Office
on the certificate of the District Executive Officer. Authorized
agents received a fixed commission per lb. of wool handled,
varying according to the services they were qualified to perform.

Such were the main outlines of the machinery adopted in
Great Britain. Apart from minor modifications this plan for
State organization of the British wool trade continued in force
for three years from June 1916 to May 1919.

Price and Valuation

While the machinery for purchase was being organized,
negotiations took place with farmers’ representatives as to
the price to be paid and the methods of valuation and pay-
ment to be adopted. The case put forward by the War Office,
with the approval of the Contracts Advisory Committee, was
that neither the ruling market prices nor the average of the
previous year’s prices afforded a fair basis on which to determine
the requisition price of British wool. The existing level of market
prices was about 75 per cent. above the 1914 level. The War
Office offered the average price ruling in June and July 1914 with

1569.53 K

©

130 TEXTILES AND LEATHER

the addition of 30 per cent. to cover the increased cost of produc-
tion. A schedule of prices was prepared on this basis for all
recognized breeds and qualities of British and Irish wool. The
fixed price was to include delivery to warehouse or railway, and
was only to be paid for washed wool in good condition, the usual
deductions being made for grease and impurities.

The farmers’ representatives made a strong appeal for recon-
sideration of this offer. They had to accept the principle of taking
cost of production rather than market value as the basis of calcula-
tion, but they protested that costs had gone up more than 30 per
cent. The Scottish farmers made out the strongest case as they
were able to produce actual figures taken from cost accounts.
The War Office accordingly agreed to increase the percentage to
be added to the 1914 level to 35 per cent. This meant that wool,
which before the war was worth Is. per lb. and in June 1916 was
fetching about Is. 8d. in the open market, was valued at Is. 43d.
per lb. under the Government scheme. The percentage addition
was increased to 55 per cent. in 1917 and to 60 per cent. in
1918.

The following table gives a comparison of the prices for typical
English wools before the war, during the first two years of the
war, under control, and after the war:

Lincoln hoggs Shropshire hoggs
(pence per lb.) (pence per Ib.)

Average price 1908-14 . : 5 . 9¢ 123
June—July 1914 . : : : : 12 14}
Average 1915 : : ‘ ‘ : if 21
June 1916 . : : : : : 20 24
Control price 1916-17 . 4 2 : 164 191
po CIS : ; : 184 22
Sr ee LOLS =LO : : : 19} 222
Highest 1920 : : : : : 29
Lowest 1920 : 6 : : : i4

The question of valuation and payment presented greater
difficulties, especially in England and Wales. Scottish farmers
were satisfied with the proposal that they should continue as
before to consign their wool to the Scottish wool brokers who were
to value and pay for it on behalf of the Department, on the basis
of a fixed schedule of prices for each quality, to be worked out
and approved in consultation with the Scottish Advisory Com-

BRITISH WOOL PURCHASE 131

mittee. In practice the greater part of the valuation in Scotland
was done by the Scottish Deputy Executive Officer and his
assistant valuers.

In England, owing to the great variety of breeds, separate
price lists had to be drawn up for each area, though a general
price list for the whole country was issued for local guidance.
Except in those areas where the auction system had prevailed,
the English farmers asked that the wool should be bought on the
farm. This demand could not be completely met. In order to
arrive at a correct valuation it is necessary to sort or ‘ case’ the
fleeces into their various grades and breeds, and this operation
can only be conveniently done, in the case of a large clip, in a
proper wool warehouse. If the farmers insisted on the wool being
bought on the farm the buyer could only guess at the valuation.
The farmer feared, however, that if he sent his wool to the mer-
chant’s warehouse, it would get mixed up with other lots and he
would not receive its full value.

This difficulty was met in two ways. First, it was agreed
that an authorized merchant might buy small lots under fifty
fleeces on his own responsibility (provided they were allocated to
him) and pay what he regarded as the fair price on the spot. When
he had collected a sufficient number of small lots in his warehouse,
a Government valuer arranged to case and value them before
taking them over on behalf of the Department. In this way the
small farmer was assured prompt payment, though as the merchant
had to take the risk of valuation by the Government expert it was
only natural that he should try to protect himself by paying the
farmer rather less than he would have got if he had sold direct
to the Government by the normal system. In Wales, owing to the
lighter weight of fleeces, the limit for “small lots’ was raised to
200. Secondly, in the case of larger clips, though the final valuation
could only take place after ‘ casing’ at an approved warehouse,
it was arranged that the farmer might be present when the casing
took place, and in order to meet the farmer’s desire for prompt
payment, arrangements were made for the payment of a pre-
liminary sum on account before the wool left the farm.

It was further agreed that in order to meet the hardship of
having to store wool for a longer period than usual, farmers

K 2

132 TEXTILES AND LEATHER

should receive interest at 5 per cent. on all wool still held by them
on their farms after September 1. This did not, however, apply
in cases where farmers had refused to send in their wool after
receiving a request to do so from the authorized merchant to
whom his clip had been allotted. But for this provision there
would undoubtedly have been a greater outcry than there was
at the delay in buying the wool. During the first year of wool
purchase, when the whole system had to be worked out under
great pressure, after the wool season had already begun, this delay
was inevitable. In 1917 and 1918, however, when the scheme
had got into thorough working order, the whole clip was collected
in a shorter time than usual.

Wool Areas and Local Staff

Once the main outlines of the scheme had been fixed it was
brought into operation with the least possible delay. During ,
July District Executive Officers and their staff were appointed
and local offices were opened ; Local and Central Advisory Com-
mittees were set up; a census of wool was taken; authorized
merchants were appointed as agents; and a beginning was
made with the allocation of farmers’ clips to individual buyers.
By the beginning of August the machinery was practically com-
plete and purchases from farmers had begun.

The decision to buy direct from farmers involved a large
measure of administrative decentralization. An idea of the
magnitude of the transaction may be gathered from the fact that
the total clip of the British Isles amounted to over ninety million
lb., in addition to thirty-eight million Ib. of skin-wool obtained
from the skins of slaughtered sheep. About sixty million lb.
were obtained in England and Wales, twenty million lb. in Scotland,
and ten million in Ireland. The number of farmers whose wool
was bought in Great Britain was 136,000; and nearly two-thirds
of the clips bought consisted of small lots of under fifty fleeces.
In order to exercise the necessary supervision over the purchasing
agents and to avoid reference of every difficulty to head-quarters,
England and Wales were divided into thirteen areas (afterwards
reduced to twelve), in each of which a District Executive Officer
was appointed. Scotland and Ireland were separate areas with

BRITISH WOOL PURCHASE 133

Executive Officers at Edinburgh and Dublin. Particulars of the
areas and the type of wool grown in each are given in Appendix 7.

The District Executive Officers were chosen from among the
leading wool merchants. They were picked men, specially
selected for their expert knowledge of wool and familiarity with
local conditions. They were required to sever connexion with
their private businesses during the period of control and were
appointed whole-time Government servants.

Each District Executive Officer nominated for appointment
a secretary, a cashier, one or two expert valuers to act as his
technical assistants, and the necessary clerical staff for corre-
spondence and records. It is worth noting that the whole of
these administrative expenses, added to those of the Central Office
in London, amounted to less than 1 per cent. of the total turnover
during the three years of control. The total annual charge of
£100,000 for administration, so far from being a heavy burden
on the taxpayer as the critics sometimes suggested, was the means
of saving at least £2,000,000 per annum in the cost of clothing the
Army, even at the level of prices ruling during control. Compared
with what would have been paid if no control had been estab-
lished, the saving was very much greater but cannot of course
be calculated.

Local and Central Advisory Committees

After the appointment of District Executive Officers and
the setting up of local offices in the areas, the next task was
to obtain the goodwill and co-operation of farmers and wool
merchants. For this purpose a Local Advisory Committee
was appointed in each area composed of equal numbers, usually
three or four, of wool growers and wool buyers. These Com-
mittees performed a large amount of detailed work and were
an essential part of the organization; many questions were
satisfactorily settled by them which it would have been difficult,
if not impossible, for the executive officials to have settled
without them. Their special functions were to advise as to
local customs and the best means of adapting or modifying
the general scheme to meet them; to suggest and approve local
price lists, based on the central price list but expanded to cover

134 TEXTILES AND LEATHER

local breeds ; to help in determining local ‘ casing’ standards,
that is, a uniform grading system; and, most important of all,
to assist the District Executive Officer in allocating clips to the
buyers in the area and to share with him part of the responsibility
for deciding between rival claimants. By leaving much of this
work of arbitration to representative Committees the Department
avoided charges of partiality and unfairness. So long as the work
was satisfactorily carried out it was a matter of indifference to
the Government how it was divided up among the different firms.
Far the simplest way of settlmg the matter was to leave the
decision on such points to a Joint Committee of farmers and
merchants. Another function of these Committees, which was
also in the nature of a safety-valve and relieved the Government
of a mass of troublesome questions, was to act in a quasi-judicial
capacity and hear appeals from farmers who objected to the
valuation put upon their wool.

In addition to the local Committees in the English and Welsh
areas there were three Central Advisory Committees, one for
England and Wales, one for Scotland, and one for Ireland. These
Committees included manufacturers as well as merchants and
farmers, and representatives of the three Boards of Agriculture
were also members. They drew up price lists and determined the
proper names and specific character of the many different breeds
of sheep and qualities of wool ; they defined technical terms whose
meaning varied locally ; they acted as a channel for ventilating
grievances and heard appeals; and in general expressed their
approval or dissent on all proposals submitted to them by the
Government. It was a great source of strength to the Department,
especially in answering Parliamentary questions, if it could be
said that a certain course of action had been deliberated upon and
approved by a Committee representing all interests concerned.
Indeed, it was remarkable how the democratic principle was
embodied to a greater extent in these ad hoc representative
Committees than in the House of Commons. The Committee took
an interest in its subject, knew the technicalities of the trade,
and when it had approved a certain course of action would take
a certain pride in seeing it well carried out. Parliament, like the
Press, rarely intervened except to express hostile and often

BRITISH WOOL PURCHASE 135

misinformed criticism. Sometimes a Member of Parliament
would allow himself, unwittingly or not, to become the partisan
of a narrow sectional view or even of a single discontented indivi-
dual ; whereas the Central Wool Advisory Committee, consisting
of “santa men who knew their subject and represented the
different interests, was generally in a position to take a broad view
and look at the whole problem in terms of the general interest.

Authorized Merchants

When dealings in British wool were stopped by the Army
Council Order of June 8, 1916, correspondence at once began
to pour in from the regular wool buyers all over the country
asking for instructions and offering to act as Government agents.
A form of application was sent to each firm requesting information
on the following among other points :

1. Their warehouse capacity.

2. The number of ‘sheets’ (bags) owned by them.

3. The weight of wool purchased or handled by them in the

three previous years.

4. The amount of wool they bought on their own account and

the amount they bought as agents.

5. Whether they were able to case wool according to the

recognized standards.

6. Whether they kept proper ledger accounts and had them

audited annually ; if so, by whom ?

7. Trade, personal, and bankers’ reference.

On the return of these forms, they were sorted out into different
areas and each District Executive Officer was asked to make his
recommendations upon them. The applicants were divided into
groups. In the first group were placed firms who had only acted
as agents for other merchants ; these were not appointed Govern-
ment agents but were allowed as before to work for their principal
firm. A distinction was then drawn between those who had
bought more than 50,000 lb. in one area and those who had bought
less, and as a rule no firm was authorized in any area where their
annual purchases had been less than 50,000 lb. Firms qualified
to act as Government agents were divided into three classes.

136 TEXTILES AND LEATHER

Class I consisted of firms who were in the habit of buying wool on
their own account but were not competent to ‘case’ wool.
Class II were the medium-sized firms who could buy and ‘ case’
wool. Class III were large firms who had premises large enough
not only to ‘ case ’ their own purchases but also to receive uncased
wool from Class I merchants and ‘ case’ it for them. Authority
to act as ‘ Authorized Merchants’ in one of the above classes were
issued from the War Office on the advice of the District Executive
Officer under whose control the firm was to operate. The rates
of remuneration were settled after negotiation with the British
Wool Buyers Association and the Country Wool Buyers Associa-
tion. The commissions were calculated at the time to be rather
less than the normal rate of profit which a wool merchant would
obtain in his private business. As Government agents they ran no
financial risks and had a fixed share of the total business guaranteed
to them.

The experience gained in the first year’s purchase led to
modifications in the second year. Delays and mistakes in valua-
tion had occurred most frequently where wool had been handled
by the small firms employed as Class I merchants. It was found
too that the small firms could not carry out the Department’s
accounting and book-keeping instructions, not having sufficient
skilled clerical assistance for the purpose. It was therefore
decided to abolish this class and to arrange that firms who were
unable to case wool should no longer be recognized as Government
agents but should be affiliated as Authorized Collectors to Class IT
or Class III merchants, who would be responsible for supervising
their operations and paying them their remuneration. This
change relieved the District Executive Officers of a great deal
of detailed supervision. In 1918 the same system was con-
tinued but a new scale of remuneration was introduced with
percentage deductions in the case of firms handling over 750,000 Jb.
and corresponding increases for firms handling less than 125,000 Ib.
A further simplification of the scheme, which was introduced in
1917, restricted the number of areas in which a merchant might
operate to those in which they actually had a warehouse. This
broke across the ‘usual channels of trade’ and was only
possible after experience had shown that too close an adherence

BRITISH WOOL PURCHASE 137

to the usual channels was inconvenient to the Government and
unpopular with the farmers.

The total number of Authorized Wool Merchants employed as
Government agents was 211 and about the same number were
recognized as Authorized Collectors. The largest firms would

handle more than two million lb. of wool; the smallest only
50,000 Ib.

Allocation of Clips

One of the most important questions which the farmer was
asked to answer on his census return was the name of the buyer
of his last year’s clip. This information was required in order
to facilitate the allocation of clips among the authorized mer-
chants ; the plan being that each should buy as far as possible
from the same farmers as before. This principle was adopted as
much for the convenience of the Government and the farmer as
for the satisfaction of the merchants’ claims. Indeed, it was
constantly emphasized that an authorized merchant had no vested
right to buy any particular clip, or in fact to be employed at all,
since private dealings had been prohibited and the War Office had
a legal monopoly of domestic wool. For this reason it was made
a condition of the appointment of agents that they should act
under the instructions of the War Office and be ready to buy or
not to buy in any particular district to suit the general convenience.

The chief reason for keeping to the same channels of collection
as in 1915 was to reduce possible grounds for complaint on the
part of the farmers. If all the wool buyers in the country had been
called up for military service, put into uniform as officers of the
Army Ordnance Department, and then sent to buy wool in districts
where they were strangers, farmers would have resented such
a system of Government purchase far more than the method
actually adopted. An officer in uniform, however well he knew
his business, would have been looked upon either as a tyrant with
no sense of justice or as a simpleton who could easily be imposed
upon ; and the Press would have been full of stories of the incom-
petence of Government wool-buying officers. Many of the smaller
wool merchants were in fact rather incompetent and often made
mistakes in valuation ; but farmers who had been content to sell

138 TEXTILES AND LEATHER

to them in the past could not complain very strongly against the
Government because they now suffered injustice from the very
same dealers.

Even so, the District Executive Officers and their Advisory
Committees had no easy task to determine the exact allocation
of clips. It was often difficult to reconcile the claims of the
Bradford merchants and the smaller country merchants who
had generally been in keen competition with one another
in the past. Authorized merchants often demanded _ total
amounts and particular clips which were incompatible with
the evidence of the census returns and, vice versa, the pre-
vious buyer indicated on the census return would often be a
manufacturer, a distant merchant or a small firm, which were
not recognized as Authorized Merchants in that area. These
marginal cases had to be adjusted by a process of give and take.
The Advisory Committee would hear all the evidence and dispense
rough and ready justice by rationing out the misfits to the most
deserving claimants. Even manufacturers were sometimes allowed
to buy under strict supervision.

On the whole this delicate work of adjustment was satis-
factorily accomplished. Very few complaints of unfair treatment
came to head-quarters. During the first year the chief concern
of the London Office was to harmonize the views of the different
areas in the question of ‘foreign’ buyers. For example, a diffi-
culty arose over wools formerly consigned from the North of
England to Scottish brokers. The English Committees alleged
that the bulk of these wools after being sent to Scotland were
bought by Bradford firms and returned to England. Accordingly
they only allocated about half their previous clips to Scottish
firms. This was resented by the Scottish Advisory Committee,
who maintained that only 5 per cent. of this wool normally
returned to England. As the Scottish case seemed a strong one,
the London Office intervened and arranged that they should
receive certain clips which had not already been allocated else-
where and that the balance should be made up in skin wool.

The chief modification in the system of allocation introduced
in 1917 and 1918 affected the operations of ‘foreign buyers ’.
The system under which firms were allowed to receive clips from

BRITISH WOOL PURCHASE 139

distant areas where they had no warehouse, was the occasion of
many complaints from farmers. It was therefore arranged that
firms should only be authorized to buy in areas where they had
warehouses, and that ‘ foreign’ buyers who desired to preserve
their previous connexions in any area must open a warehouse
there, which would be under the control of the District Executive
Officer for that area. Under this arrangement several large firms
opened new warehouses in different parts of the country (an
extra expense which. justified among other things the slight
increase in remuneration conceded in 1917 and 1918), whereas
other firms concentrated in their home areas. Efforts were made
by the allocation of surplus clips to compensate as far as possible
for this readjustment ; and in some areas a certain latitude was
allowed. For example, firms close to a border were allowed to
receive their usual clips from places fifteen miles from the border.

This reform, which further modified the usual channels of trade,
promoted economy of transport and better supervision. It was
a source of great improvement in the working of the scheme and
removed the most serious causes of complaint which had arisen
in 1916.

The machinery of purchase needs no long description. As soon
as a clip had been allocated the second half of the census form was
sent to the authorized merchant, the first half being kept to form
the basis of the farmer’s file in the District Office. This served
as authority to take up the clip. At the same time a post card was
sent to the farmer informing him of the firm appointed to buy his
wool. On receipt of the census form, the authorized merchant
dispatched his sheets to the farmer and either requested him to
pack and deliver his wool himself or arranged to send a man to
superintend the packing and make a preliminary valuation on the
farm. This practice was followed in 1916 but was discontinued
in 1917 owing to the shortage of skilled labour resulting from the
calling up of men fit for military service. On receipt of the pre-
liminary valuation certificate in London, the Finance Section of
the War Office sent a draft for 75 per cent. of the amount indicated
direct to the farmer. The balance was paid after the wool had
been cased and the valuation had been checked by the District
Executive Officer. The documentary and accounting arrange-

140 TEXTILES AND LEATHER

ments, which were devised by wool experts and accountants in
consultation, were so complete and straightforward that payments
could be made by the War Office within five or six days of the wool
leaving the farmer’s premises. Prompt payment was one of
the points on which farmers laid most stress and which the scheme
was specially designed to secure. Where delay occurred it was
generally due to congestion in the wool merchants’ warehouses
and transport difficulties. A leading south country agriculturist
said at a meeting of the Central Advisory Committee that the
farmers in his neighbourhood had been amazed at the quickness
with which they had been paid. Many complaints, however,
were received in 1916 that farmers were unable to get their
wool lifted as soon as they would have liked; this delay was
unfortunately unavoidable owing to the time taken to get the
scheme into operation after the wool season would normally have
begun. Something was done to meet the hardship by paying
interest at 5 per cent. as from September 1 on wool not bought
by that date.

Valuation was based on an official schedule of standard grades.
When the wool arrived in the warehouse it was unpacked and
each fleece was examined and graded. A full record was kept of
the number of each grade and inserted in the ‘ Casing Return ’,
together with deductions for any imperfect fleeces such as ‘ cotts ’,
i.e. matted or grey fleeces, and for dirty or greasy condition. The
total was arrived at by weighing the fleeces in each grade separately
and reckoning their value at the fixed price per lb. for that grade,
and then making the necessary deductions. The ‘ casing return ’
was signed by the merchant or his employee who performed the
grading—a, highly skilled operation in which a great deal depended
on the individual judgement of the valuer. Between twenty or
thirty standard qualities were recognized and variations from
these were left to the discretion of authorized merchants and
District Executive Officers. That mistakes occurred is not
surprising considering the number of agents employed and their
varying skill in valuing.

- When the scheme was first started it seemed as if valuation
at fixed prices would present insuperable difficulties. It was
feared that if matters were left to the individual judgement of wool

BRITISH WOOL PURCHASE 141

merchants, they might be tempted to favour the farmers by over-
valuing. Since they were employed at a fixed commission per
Ib., they would have nothing to lose by over-valuation and might
strengthen their connexion for the period after the war. But the
general impression created in the War Office by the experience
of State purchase was that, whether out of zeal on behalf of the
Government or from sheer force of habit, the authorized wool
merchant tended rather to under-value than to over-value the
farmer’s wool. Not infrequently the War Office had to check
the natural instincts of its agents to drive a hard bargain. On the
whole there were surprisingly few complaints about valuation ;
the farmers, not being experts in the wool trade, were content to
trust the judgement of their regular buyers.

Complaints

Naturally such drastic interference as State purchase involved
could not be carried through without causing dissatisfaction.
In the autumn of 1916, when the scheme was first being launched,
strong protests were raised in Parliament. Mr. Prothero, who
shortly afterwards became Minister of Agriculture and had to
defend, even if he did not altogether approve, the still more
drastic measures of control imposed on farmers by Lord Rhondda,
declared in the House of Commons on November 1916, ‘ You
could not have had that purchase carried out in a way that would
have given more dissatisfaction to the agricultural community.’

It was not in such sweeping generalizations that farmers’
representatives on the three Central Advisory Committees and
the thirteen Local Advisory Committees expressed themselves
with regard to the scheme, the main lines of which they had them-
selves approved or at least helped to frame. In 1916 there was
certainly one substantial ground for complaint; that was the
delay in taking up the clip owing to the fact that the Government
only decided at the eleventh hour to purchase the British wool
clip. This meant that most farmers had to wait two or three
months, while the scheme was being set in motion, before they
could dispose of their wool. In 1917 and 1918 no delay occurred
on this account, and the whole clip was lifted more promptly than
in normal times. Other complaints as to price, valuation, and

142 TEXTILES AND LEATHER

trade customs did not in fact bulk large ; but troubles of this kind
arose in the first year, especially in Wales and Devon, and the
constant ventilation of Welsh and Devonian grievances in the
House of Commons gave a wrong picture of the administration
as a whole.

The War Office requisitioned private property belonging to
136,000 farmers, the greater number being paid direct by the
Finance branch at Whitehall; but of these during the 1916-17
season only 612 wrote to the Department. Most of the corre-
spondents merely asked for information or for special concessions,
such as to use their own wool or to have it spun for their own use ;
only 139 made complaints. One explanation no doubt is that
farmers as a class are not good letter-writers.1_ Another explana-
tion may be that though they grumble farmers have a habit of
resignation, and accepted the intervention of the War Office as
they would a spell of bad weather. Most farmers would probably
as soon have written to the Meteorological Office about the
weather as write to the War Office about the price of wool. But
whether the explanation be that they suffered in silence or that
they had few grounds for complaint, the fact that less than
a half per cent. of the wool-growers in the country wrote to the
War Office is certainly surprising.

At the local offices complaints about valuation were referred
to the Local Advisory Committees for arbitration. Out of 113
cases heard 100 were settled in favour of the War Office or with-
drawn by the farmers, and in 13 the farmer was awarded part
or all he asked. In almost every case the members of the Com-
mittee were unanimous ; the contingency feared by farmers, that
the agricultural representatives voting in favour of the grower
would be outvoted by the merchants, who would all vote against
him, never occurred in actual practice.

Skin Wool

More than a quarter of the wool annually produced in the
United Kingdom is obtained from the skins of sheep which

1 Early in the war a letter was received in the War Office from a farmer, which
began as follows :

‘ Dear Lord Kitchener,

re War.
Now that the above has commenced .. .’

BRITISH WOOL PURCHASE 143

have been slaughtered for mutton. Skin wool is not bought from
the farmer nor from the butcher; it is obtained from the fell-
monger, who buys the skins from the butcher in a hide and
skin market and sells the pulled wool and the cured pelt. The
machinery of collection under State purchase was comparatively
simple, since it involved the control of a narrow ‘ bottle-neck’.
All skin wool passed through the hands of fellmongers, of whom
there were only a small number, less than a hundred for the whole
of Great Britain. No restrictions were placed on the price of
sheepskins, but fellmongers were informed of the price at which
the pulled wool would be requisitioned from them. A register
of recognized fellmongers was compiled, and each licensed fell-
monger notified the amount of skin wool he had for sale from time
to time. One of the official skin wool valuers, usually the District
Executive Officer for the Area, would visit the fellmonger’s
premises and value his wool ; and the wool would then be invoiced,
paid for, and held on War Office account until delivery orders were
received. Samples of every lot so bought were sent to London
and displayed in the skin wool sample room of the Tothill Street
Office. Purchasers would select the description they preferred
and buy according to sample.

The trading accounts for skin wool purchase in Great Britain
show net profits of £183,358 for the ten months ending May 26,
1917, £639,939 for the ten months ending March 31, 1918, and
£1,227,767 for the twelve months ending March 31, 1919. The
administrative expenses for the three years, including travelling
expenses and miscellaneous expenses, were only £2,278, £4,083,
and £5,745. Though the turnover was less than half that of
fleece-wool purchase, the profits realized during the second and
third years were slightly greater. This was largely due to the
fact that skin wool did not go into consumption as fast as fleece
wool, and that a larger proportion, especially lambs’ wool, was
sold at high prices for the manufacture of specialities.

Manx Wool

The original Order prohibiting dealings in the wool of the
1916 clip grown in Great Britain and Ireland did not apply
to wool grown in the Isle of Man. Consequently English and
Scottish ‘merchants were free to buy up Manx wool in com-

(144 TEXTILES AND LEATHER

petition with the local mills, which had hitherto been accustomed
to obtain the bulk of the lowland wool grown in the island and
to work it up into yarn and flannel for local requirements. During
the war local requirements were increased by the needs of prisoners
of war and interned civilians lodged on the island. Accordingly,
on June 22, 1916, by agreement with the Manx Government the
Order prohibiting dealings in wool was extended to the Isle of
Man. Two Government Wool Depots were established, one at
Douglas and the other at Ramsay, and were placed under the
management of two Manx Agricultural Inspectors. Twelve
firms, of whom six were local mills, were authorized to collect
wool on behalf of the Government, buying only from the farmers
from whom they bought in 1915 and selling only to the Government
Treasurer. Farmers might also, if they preferred, consign their
wool direct to a Government Depot. All wool had to be delivered
by the farmers of the island on or before October 30, 1916. A list
of prices for the various descriptions was drawn up and published,
and a fixed commission of jd. per lb. was allowed to the collecting
agents. Valuation on behalf of the Government was entrusted
to an expert taken from the leading firm of local buyers and
appointed a Government servant at an annual salary. Payment
was made by the Government Treasurer after inspection and
valuation at a Government Depot by the official valuer. Local
mills which desired to buy wool for manufacturing purposes were
able to obtain it from the Manx Government on payment of the
fixed issue prices corresponding to those ruling on the mainland.

Though the amounts were relatively small the trading accounts
for Manx Wool Purchase are shown separately in the official
report on Raw Materials. The totals collected each year were
236,873 Ib. in 1916, 264,444 Ib. in 1917, and 279,566 Ib. in 1918.
Purchases were financed by advances from the War Office and
not by the Manx Treasury. Unlike the Dominion Governments,
the Isle of Man Government did not stipulate for any share in the
profits, which as the accounts show were fairly substantial in
1917 and 1918. On a total expenditure of £50,090 during the
three years, the aggregate net profits amounted to £8,383, after
paying interest on the capital employed.

1 Omd. 788, pp. 32, 39, and 48.

BRITISH WOOL PURCHASE 145

Free Carriage

A point worth noting is the arrangement made for free car-
riage on the railways. Since all wool became the property of
the Government before it was put on rail, if was found possible
. to arrange with the railways that they should carry wool as
Government stores free of charge, under the agreement made
with the Railway Companies when the railways were taken over
in 1914. The railways accepted consignment notes signed by the
District Executive Officers as authorization for free carriage.
The total amount of freight charges represented by these con-
signment notes was roughly estimated once a year and the lump
sum so arrived at was debited-to the War Department and the
Railway account kept by the Treasury received a correspond-
ing credit. This system saved an immense amount of time and
money not only to the officials and agents of the Department but
also to the Railway Companies. In normal times the freight
payable has to be calculated for every consignment of wool. An
invoice for the freight has to be made out which has to be checked
by the wool merchant (a matter often involving lengthy dispute),
and steps have to be taken by both parties to see that payment
is rendered and received promptly. The saving of clerical labour
to all concerned, at a time when the claims of military service were
denuding both the Railway Companies’ and the wool merchants’
clerical staff, was not the least important economy rendered
possible by centralized purchase.

Distribution and Sale

The machinery for distributing British wool worked more
smoothly than many had anticipated. The magnitude of the
selling organization created constituted a record in the wool
trade and few thought that so vast a business could be con-
ducted without serious delays and congestion. But in practice
the business of disposing of 120,000,000 lb. in large consign-
ments of 100,000 lb. lots and over proved no more difficult
than the normal scale of business conducted by a large firm
involving sales of 1,200,000 lb. in lots of five to ten thousand lb.
Concentration and large scale operations meant an economy of

1569.53 L

146 TEXTILES AND LEATHER

effort and especially economy of clerical labour on the part of
buyer and seller alike. But more important than this for the
War Office was the fact that centralization of purchase and sale
made it possible to regulate the flow of raw material into the
channels required and to know at a glance the whole position
with regard to purchases, sales, reserves, and deliveries due. All -
the dark corners were illuminated and nothing was left to chance.
From the point of view of the manufacturer the chief grievance
was that it was practically impossible for makers of luxury articles
to get British wool which was at all suitable for military purposes ;
but army contractors derived considerable benefit from the
regularity and simplicity with which they could obtain their
supplies. They were able to order their requirements in bulk
from a single source, and if the particular wool which they pre-
ferred was difficult to obtain they could count on the possible
alternatives being offered to them without having to waste time
in negotiating with hundreds of different sellers.

In fixing the price of British wool at 35 per cent. above the
1914 level the War Office had taken its stand on the principle of
cost of production and a fair profit. This meant that farmers were
receiving considerably less than the full market value, taking into
account the level of prices ruling at the time for colonial wools of
similar quality. The question then arose at what price the
Government should sell. Should it sell at cost price plus expenses
of collection and transport ? Should it fix an arbitrary level of
prices somewhere between the cost price and the open market
value? Or should it sell at the highest price obtainable in the
open market and thus realize a large profit ?

The third alternative was ruled out by the decision to control
distribution ; if wool had been put up for auction and sold to the
highest bidder there would have been no means of regulating
the use to which it was put. It was necessary, therefore, to issue
the wool at fixed prices. The first course was only possible in the
case of wool supplied to army contractors for the manufacture
of goods for military purposes. There would have been no
justification for supplying wool for the civil trade at less than its
market value in the absence of any means for controlling the price
of the finished goods. This would merely have meant making

BRITISH WOOL PURCHASE 147

a present to the manufacturer at the expense of the farmer.
A middle course was therefore adopted. Wool was issued for
civilian consumption at fixed prices which approximated to
the current market level and were altered at intervals. At
the outset wool was issued for Government contracts below
market price at a level approximating to cost, but in 1917 this
‘military issue’ price was abolished and it was found convenient
to have only one level of selling prices for all wool both British
and Colonial. Australian and New Zealand wool cost considerably
more than home wool owing to the heavy expenses of transport
and insurance. Chiefly owing to the increased amount necessary
to provide against submarine losses, the fixed issue prices were
advanced during 1918, and large profits were therefore realized
on the sale of British wool.

On March 31, 1919, the accumulated profits on home wool
purchase amounted to £6,833,196, and on total sales for the three
years amounting to £33,686,169 the administration expenses
were less than 1 per cent.1_ From a commercial standpoint British
wool purchase was therefore a successful transaction, but since
the object of the Government was not to make profits this criterion
isnot of much value. The real advantages to the State were first,
that by monopolizing purchase and sale prices were prevented
from rising as high as they would otherwise have done ; secondly,
that the price of woollen goods required for military purposes was
no longer dependent on a speculative market, but was brought
into close relation with the actual cost of production from the
raw wool up to the finished stages ; and lastly, that the Govern-
ment was able to obtain a first call on domestic wool supplies for
its own requirements and regulate the distribution of the balance
to the best advantage in the general interest.

1 Trading Accounts for Home Wool Purchase are given in Cmd. 788, pp. 28-52.

CHAPTER XII
THE WOOLLEN AND WORSTED INDUSTRIES

Topmaking — Woolcombing on commission — Topmakers as Government
agents — Conversion costing — Economies effected — New specifications and
use of rags and waste — Allocation of contracts — Decentralization — Restric-
tions on civil trade in 1917 — Central Wool Advisory Committee — Priority
scheme — Reduction of hours — Discontent in the industry — Appointment of
Board of Control — Partnership between Government, Employers, and Labour —
Standard clothing scheme — Application of costings to civilian products —
Working of the scheme — Abandonment after the war.

Tue first process of manufacture in the worsted industry is
the making of tops. In the woollen industry wool is merely carded,
but to make worsted yarn the wool has to be combed into tops
in order to remove the short fibres and impart the necessary
strength. Worsted spinners buy their tops from topmakers, who
get the combing done for them on commission by woolcombers.

Gradually this whole business of woolcombing and topmaking
came under direct Government control. Cross-bred tops were
required in large quantities for spmning the worsted yarn used
in the manufacture of khaki cloth and army hosiery. In order to
ensure priority for these requirements, it was necessary for the
War Office to arrange for direct allocation of tops to army con-
tractors. It was therefore decided that British wool suitable for
army purposes should be combed into tops on Government account
and allotted at fixed prices to contractors. Arrangements were
made with the large topmakers to act as agents for the Govern-
ment in carrying out this plan. The allocation and sale of the tops
was centralized in the Government Wool Office at Bradford. Early
in 1917 the same system was extended to the combing of colonial
wool into tops for military purposes. As a consequence the
topmakers lost another large slice of their private business. In
May 1917 the final stage was reached. At that time the submarine
campaign was at its height ; the prospect of adequate shipments
from the Dominions was very uncertain; and the census of stocks
had revealed a dangerously low reserve of wool in the United
Kingdom. It was therefore decided as a measure of precaution

THE WOOLLEN AND WORSTED INDUSTRIES 149

that all wool in private hands including topmakers’ stocks should
be taken over by the Government. At the same time it was
decided to fix the selling price of all raw wool and tops both for
civilian and military purposes. As a corollary it was necessary
to insist that all tops should be combed on commission for the
Government. The whole of the topmakers’ private business of
buying wool and selling tops thus came to an end. From that
time onwards topmakers became Government agents operating
for a fixed commission like British wool merchants and the London
wool-selling brokers.

As soon as the Government was able to supply raw material
at a fixed price it became possible to apply the costings system
more thoroughly, and to regulate the prices of yarn, cloth, hosiery,
and blankets for military purposes by reference to conversion
costs. In the spring of 1916 this had been impossible because
the cost of the raw material was unstable; but even with fixed
prices for raw material the fixing of conversion costs involved
great technical difficulties owing to the number of variable factors,
such as wastage of material in the process of manufacture.
Not only accountants, but the foremost technical experts in the
industry were employed in investigating costs and standardizing
specifications.

In the case of yarn required for military purposes the War
Office was now able to negotiate direct with the spmner and to
requisition such part of their output as might be required. Tops
were issued to spinners at fixed prices and spun by them into yarn
at rates based on conversion costs. The yarn was then delivered
on Government account to worsted cloth or hosiery manufacturers.
These in their turn were required to devote a certain proportion
of their output to army goods and received a price based on the
ascertained cost of conversion. The economies rendered possible
by the application of the costings system are illustrated by the
fact that early in 1917 the cost of khaki cloth was reduced from
8s. 3d. per yard to 7s. per yard, which represented a saving in
this one item of £1,000,000 per annum.

The experts recruited from the various branches of the trade,
who worked as temporary officials in the War Department Cloth
Office at Bradford, not only investigated costs but devoted their

150 TEXTILES AND LEATHER

special knowledge and experience to the introduction of new
processes and new specifications in the manufacture of army cloth.
By the skilful use of wool-waste, noils, and rags important econo-
mies were effected both in the cost of cloth and in the consumption
of new wool. The salvage of old uniforms provided 5,000 tons
of rags annually ; remnants of cloth issued to shirt makers and
clothiers were recovered and converted into shoddy; and noils
and wool-waste were requisitioned from woolcombers and spinners.
The secret of blending these materials with new wool so as to
produce a strong and durable army cloth was imparted to army
contractors by experts who had formerly been their competitors.
By this means great-coat cloth, for example, which had formerly
cost 10s. 6d. a yard, was produced at 9s. a yard by a blending
process which reduced the amount of new wool used without
interfering with the quality of the cloth. This pooling of technical
knowledge and experience was one of the most important results
of control in the woollen industry, as in other trades.

A necessary corollary to the application of the costings system
was an organized system of allocating army contracts. Govern-
ment contracts were now less profitable than the civil and export
trade. Arrangements had, therefore, to be made that all firms
with suitable machinery undertook their fair share of the work.
For this purpose twelve advisory committees on the allocation
of contracts were set up in the principal manufacturing centres
of the woollen and worsted industries together with four commit-
tees in the chief centres of the hosiery industry. The chairman of
the first twelve constituted a Central Advisory Committee on the
Allocation of Contracts. The War Office allotted a total figure to
each committee and invited their recommendations as to the
orders to be allotted to each manufacturer. This system intro-
duced a useful element of self-government in the administration
of control and relieved the department of a large amount of
difficult negotiations and decisions.

The introduction of the costings system and the distribution
of raw materials at fixed prices necessitated a large amount of
decentralization. An office was set up in Bradford divided into
departments dealing with raw wool, tops, yarn, and cloth, and
a number of experts in the trade were induced to leave their

THE WOOLLEN AND WORSTED INDUSTRIES 151

private business and serve as temporary officials. Similar offices
on a smaller scale were set up in Leicester, Manchester, Edinburgh,
and Dublin.

As the shipping situation became more serious the Government
was compelled to interfere to an increasing extent with the civil
trade. During the early months of 1917 the submarine menace
and the increasing diversion of ships to the North Atlantic route
caused serious concern as to the future of wool supplies. The War
Office was compelled to adopt a policy of extreme caution in order
to conserve sufficient stocks of raw material for the use of the
British and Allied armies, and the increasing stringency with
which civil trade had to be curtailed led to important new develop-
ments in the relations of the Government with the industry. In
April 1917 the Central Wool Advisory Committee, which included
representatives of every section of the trade, from the wool
importer to the export cloth merchant, and also trade union
leaders, decided that it was necessary to build up a substantial
reserve of wool. In order to achieve this, and at the same time
to maintain the export trade, it was decided to ration manu-
facturers by the application of a priority scheme. On April 14,
an Order was issued requiring manufacturers to give priority to
orders according to their classification as Class A, Class B, or
Class C. Class A included all orders for the British and Allied
Governments ; Class B, orders for the export trade and other
orders certified to be of national importance; Class C, orders
for civilian consumption at home. On May 24 a further Order
was issued on the recommendation of the Central Advisory
Committee providing for a reduction of the weekly hours of
work by 20 per cent. from 553 to 45. In addition six District
Priority Committees with a Central Committee in London were
appointed to ration spinners and manufacturers and to deter-
mine the rate at which wool and tops already in their possession
might be put into consumption. When the spinners received
from the District Priority Committees their first authorization for
civilian production, many of them found that in one month they
had consumed more than they were entitled to use for three months,
and that the amount authorized was insufficient to enable the
machinery to be run even for 45 hours per week. Towards the

152 TEXTILES AND LEATHER

end of July Mr. H. W. Forster, M.P., Financial Secretary to the
War Office, addressed a large meeting of traders and manu-
facturers at Bradford giving confidential information of the
statistics of stocks on hand and of probable future imports ;
but this did little to appease the discontent which the policy
of restriction had aroused. The accuracy of the figures was
challenged, and a demand was made that the control of the
worsted industry should be taken out of the hands of the War
Office and transferred to a board of business men similar to the
Control Board set up in the cotton industry. This demand could
not be met in full; but in September 1917 a Board of Control of
the woollen and worsted industries was created to exercise certain
limited functions.

The Board consisted of eleven War Office representatives,
eleven representatives of employers, and eleven representatives
of labour, the Chairman being Sir Charles Sykes, K.B.E., Director
of Wool Textile Production at Bradford. Its chief functions were
to take over the work of the existing priority committees and to
allocate to districts, trades, groups, and firms the quantity of
wool, tops, and yarns available for civilian trade. The War Office
still reserved the right to decide the amount of raw wool to be
maintained as areserve. The Department of Wool Textile Produc-
tion was responsible for placing contracts for Government supplies;
and the Raw Materials Department continued to be responsible
for the handling of raw wool up to and including the making of
tops. Fortunately for the success of the new scheme it soon
became possible to relax the restrictions previously imposed.
From September onwards the weekly hours of work were increased
from 45 to 50. The new arrangement gave general satisfaction.
The War Office was relieved of the difficult task of rationing
manufacturers for civilian consumption, and the new experiment
of vesting control over civilian trade in a body based on a partner-
ship between the Government, the employers and Labour was
abundantly justified.

Standard Clothing

The severe restrictions placed on production for civilian
consumption caused a sharp rise in the price of ordinary woollen
and worsted goods, and very large profits were made by manu-

THE WOOLLEN AND WORSTED INDUSTRIES 153

facturers and merchants who had stocks to sell. The representa-
tives of Labour on the Board of Control protested against this
profiteering, and urged that since the whole of the raw material
was purchased with public funds, it was. the duty of the State to
control the price of the finished products in the interest of the
general body of consumers. This demand was met by the intro-
duction of the Standard Clothing Scheme. The plan was to apply
the system of costing and price-fixing to the manufacture of goods
for civilian consumption in the same way as it was already applied
to goods for military purposes. One of the first tasks of the new
Board of Control was to undertake the organization of this scheme.
The types of cloth and garments produced were as follows :

Hosiery including socks.

Blankets.

Flannel.

Suits, men’s and boys’ in woollen and worsted.

Women’s ready-made skirts.

Standard specifications were adopted for each type of article
to be produced, and arrangements were made for giving each
item a distinctive mark or selvedge, the use of which was pro-
hibited for other purposes. Wool and tops were issued to manu-
facturers by the War Office at fixed prices, and conversion costs
were fixed for each stage of production by agreement between the
officials of the Control Board and the branch of the industry
concerned. The retail price of the goods was fixed so as to yield
a reasonable margin to wholesale and retail traders, and the
retailer was not allowed to sell at more than the standard price
so fixed. Committees representing each branch of the industry
concerned were set up to organize production and distribution
in their respective spheres. Joint committees were formed to
arrange the distribution of the products from firms in one branch
of the industry to firms operating at the next stage. For example,
a joint committee of cloth manufacturers and clothiers arranged
the distribution of cloth in the wholesale clothing industry ; and
a joint committee of clothiers and retailers arranged the distri-
bution of finished garments among retail traders. No public funds
were employed in the administration of the scheme. The raw
material was purchased by the spinner or manufacturer from
the State; and in turn he sold his product to the producer or

154 TEXTILES AND LEATHER

distributor at the next stage in order of sequence. A small sum per
garment or yard of cloth was levied to provide funds for the office
expenses of the Standard Clothing Section of the Department of
Wool Textile Production. There was no official inspection of the
goods produced, but clothiers and retailers had to satisfy them-
selves that the goods delivered were up to standard. Export of
standard goods was prohibited, and rejected goods were disposed
of at the discretion of the Department of Wool Textiles. Certain
cloth, which was not up to the standard quality, was at one time
sold abroad on Government account at a good profit.

To the limited extent to which it was carried out, the scheme
was successful. Flannel, hosiery, and blankets were placed on
the market in considerable quantities, and met with a ready
demand since no other goods could compete with them in price.
The quantity of suits distributed was small; they only became
available after the Armistice, when large stocks of standard suits
were requisitioned by the War Office for the use of discharged
soldiers. The chief weakness of the scheme was that it was worked
on a voluntary basis. No orders were made requiring manu-
facturers or distributors to produce or handle standard clothing,
with the result that the burden of supplying the civil trade at
controlled prices was not shared evenly throughout the industry,
in the same manner as army contracts. Though the scheme was
worked by the trade through trade channels it was naturally not
popular, either with manufacturers or producers. After the war
it was soon dropped, and though prices continued to rise for nearly
two years, the efforts of the Labour representatives on the Wool
Council to have it re-established were unsuccessful. In order to
make it a success, and to prevent public-spirited manufacturers
being left at a disadvantage compared with their competitors,
it would have been necessary to use compulsory powers; but
though the Government passed an Act against profiteering in
1919, they refused to obtain the necessary powers to enforce the
standard clothing scheme. Later in the year, a limited number
of standard garments were again placed on the market by volun-
tary arrangement, but by the time they reached the retailer
a severe slump in prices had taken place and the necessity for the
scheme had disappeared.

PART III
MEAT AND FATS

CHAPTER XIII
THE MEAT TRADE AND WAR PROBLEMS

Meat shortage during the war — Popular demand for Government control,
May 1917 — Meat (Sales) Order, 1917 — Description of meat trade — How
the retail butcher obtains his supplies — Farmers’ methods of sale — Distinction
between live weight and dead weight — Preference of farmer for live weight —
Links in the chain between the farmer and the butcher — Regulation of supply
and demand under normal conditions — The American Meat Combine and the
price of cattle — Automatic regulation of distribution — The meat problem
during the war — Original scheme of control — Objects aimed at — Municipal
control of retail distribution — Proposals for price reduction — Reserve of meat
more economical than reserve of cattle.

Every belligerent country had to face serious difficulties in
providing a sufficient supply of meat at reasonable prices to feed
the Army and the civilian population. Great Britain, unlike
Continental countries, had been accustomed to rely to a large
extent upon frozen meat imported from Australia, New Zealand,
and South America, the bulk of which was sold in the towns to
the industrial population. France, Italy, and Central European
countries were normally able to support themselves on their own
herds.

Apart from the general effects of currency inflation, meat
prices throughout Europe were subject to influences specially
affecting agriculture. The calling up of farm hands and the lack
of imported feeding stuffs were the principal causes of the falling
off in the herds, but the general impoverishment of the soil owing
to the shortage of artificial fertilizers, the necessity of conserving
grain and leguminous products for human consumption, and the
heavy demands of the Army for oats, hay, and other feeding
stuffs for horses all contributed to accentuate the shortage. In
Great Britain these factors operated to a certain extent, especially
towards the end of the war, but the principal causes for meat

156 MEAT AND FATS

shortage were the increased consumption due to the liberal scale
of Army rations, and, from 1917 onwards, the growing shrinkage
in the amount of the refrigerated shipping space available. As
in the case of other commodities, a small deficiency in supply was
sufficient to cause a disproportionate increase in price, especially
in view of the fact that the purchasing power of the population,
measured in money, was rapidly increasing owing to currency
inflation.

The shortage and the rise in prices first began to grow acute
in the early part of 1917. It is true that Lord Devonport was able
to state in the House of Lords on May 8 that the herds in the
country were ‘as large as, if not larger, than at any previous
period ’. But the needs of the Army and the decrease in imported
supplies were already beginning to cause anxiety. On May 17
Captain Bathurst announced in the House of Commons that the
question of controlling the supplies and price of meat was under
the consideration of the Food Controller in consultation with the
Board of Agriculture.

Meanwhile prices cl to rise and the daily press
gave evidence of increasing resentment on the part of the
public. Energetic action to “check the extortionate demands of
butchers and farmers was demanded. As a result of the examina-
tion conducted by the Government, it was concluded that prices
had been unduly forced up by speculation and ‘ inter-trading ’,
that is, the passing of live stock and meat through several hands
by a process of buying to resell. Accordingly, on May 31 the Food
Controller issued an Order entitled the Meat (Sales) Order, 1917,
which was designed to prevent inter-trading by making it illegal
for any person who had bought fat cattle to sell them except to
a person who gave a written undertaking that he was buying them
for slaughter within fourteen days. The Order also prohibited
the sale of dead meat except to a retail butcher or to a person
buying for consumption, and prescribed the maximum margin
of profit which the wholesale salesman might charge on the sale
of carcasses and joints.

This Order was recognized to be only a preliminary step, and
though it checked the multiplication of speculative dealing—
a phenomenon which accompanies every period of rising prices—

THE MEAT TRADE AND WAR PROBLEMS 157

it had no effect in bringing prices down. So long as the consumers’
demand remained fairly constant, only an actual increase in supply
could have had that effect under the conditions of free trading
then ruling in the markets. But an increase in supply was out
of the question. The chief reason for the rise in prices was. that,
whereas in normal times 40 per cent. of the meat consumed in
the country was imported, during the war these overseas supplies
were diverted for the use of the Allied armies and navies, and less
than 10 per cent. of the civilian meat supplies were obtainable
from foreign sources. The abnormal increase in prices was thus
due to a falling off in the usual flow of supplies from abroad and
was not paralleled by any corresponding increase in the cost of
production of home-killed meat. Farmers, in fact, frankly
admitted that the level of prices which had now been reached,
through no fault of their own but solely owing to the keen com-
petition of buyers, could not be defended, and, if the abolition of
profiteering was to be more than a phrase, could not reasonably
be expected to continue.

A more thorough-going scheme of control was seen to be
necessary, but the more the question was explored the more
insuperable appeared the difficulties. In order that these diffi-
culties may be appreciated a brief description must be given of
the way in which the meat trade of the country normally func-
tions. There is no difficulty in recognizing the ultimate producer
on the farm and the immediate supplier in the butcher’s shop.
It is the channels of trade through which the commodity passes
from the one to the other that have to be considered. There are
two main divisions, according to whether the butcher is supplying
meat killed at home or frozen meat imported from abroad. The
home trade presents a number of alternative possibilities. In
rural areas the butcher may have his own farm and his own
slaughter-house. He may buy ‘store’ cattle, and make an
arrangement with a farmer to fatten them for slaughter on his
account for a commission of so much per head. But as a rule the
country butcher will either buy fat beasts direct from the farmer
by private treaty from week to week, or he will attend at the
nearest fair or auction, where he will buy in open competition with
neighbouring butchers, with dealers, and with wholesale butchers

158 MEAT AND FATS

from the towns. Two other possibilities are open : he may some-
times buy from a cattle-dealer who brings him beasts for slaughter
from a farm or market some way off, or he may buy dead meat
from a carcass butcher or a wholesale salesman in a neighbouring
town. Asa rulethe country butcher has his own slaughter-house,
while the butcher in the small town will have his beasts killed for
him in a municipal or private slaughter-house. In the large towns
the retail butchers have no slaughter-houses and rarely buy live
animals. They are dependent for their supplies on the meat
market, where wholesale butchers and salesmen, selling for farmers
on commission, sell carcasses, sides, or joints. Lastly, the town
butcher is accustomed to buy frozen meat either in the dead meat
market, as at Smithfield in London, or direct from a large importing
firm or an agency of one of the American or Colonial freezing
works.

The farmer’s methods of disposing of his stock vary, as in the
sale of domestic wool, in different parts of the country. Four
alternatives are open: to sell by private treaty on the farm, either
direct to the butcher or to a live-stock dealer; to send the animals
alive to a neighbouring market, where they will be put up to
auction before a crowd of buyers; to have the beasts slaughtered
in a local slaughter-house and then to send the carcasses for sale
‘on consignment’ by a wholesale meat salesman in Smithfield
or some other centre ; or lastly, to send the beasts alive to a whole-
sale butcher or carcass butcher, who will slaughter them and remit
the proceeds on the basis of so much per pound of dead meat
together with the market price of the hide or skin and the ‘ offal’.
The first two are methods of sale by ‘ live weight’; the last two
are sales on the ‘ dead weight ’ basis.

This distinction is important. When a butcher buys a live
beast for slaughter, he has no means of calculating its real value.
He knows the market price of meat, the price he is likely to
get for the hide and skin, and the price per pound of bone and
offal. By weighing and feeling the animal he can make a rough
guess at the amount of meat on it, and a still rougher guess
at the weight and quality of the hide. In the case of unshorn
sheep he will be hard put to it even to guess at the value he
is likely to realize for the wool. The buyer on the live-weight

THE MEAT TRADE AND WAR PROBLEMS 159

basis is therefore very much in the dark as to the price he can
afford to pay, if he is to protect himself against loss, and the
seller can never be sure that he is getting full value for his
product. On the dead-weight basis, however, the farmer retains
the property in the animal up to the point where it has been
slaughtered, flayed, and prepared for sale. He is credited by the
buyer with the wholesale market value of the actual yield of dead
meat, of the hide, skin, or wool, and of the head, tail, feet, and
other parts. He can thus be sure that he is getting full value,
providing he trusts the honesty of the wholesale butcher, to whom
he consigns his property. The latter is clearly the fairer and more
scientific method of sale, but it presupposes a standard of mutual
confidence between farmer and butcher which unfortunately
does not generally exist. The farmer is suspicious of the dead-
weight system ; he does not like to part with his property before
he sees the cash ; and he is afraid that if he sends his beasts a long
distance off they may go astray or be mixed up. He has no
confidence that the slaughterer will be able to identify the meat,
hides, wool, and offal produced from his animals, or that he will
take the trouble to account to him for the proceeds with sufficient
accuracy. He therefore prefers as a rule, even at the risk of
receiving less money, to sell his beasts outright ‘on the hoof’,
rather than to sell on consignment on the dead-weight basis.
The two systems and the farmer’s preference for the more specu-
lative of the two are closely parallel to those already noted in the
case of home-produced wool, where the English farmer prefers to
sell his wool ungraded in his barn rather than send it to be * cased ”
and paid for on the basis of the actual value of the fleeces yielded.

It will be useful at this stage to summarize the functions of
the various links in the chain. This will also provide a glossary
of some of the technical terms used in subsequent descriptions of
the working of control.

Breeder. A farmer who rears cattle and sheep for sale as
‘ stores ’, that is, immature heifers or bullocks not yet ready for
slaughter.

Grazier. A farmer who buys store cattle for fattening. Stores
are often sent long distances to the best fattening districts.
A large number of stores are shipped from Ireland and sold by

160 MEAT AND FATS

dealers to graziers in Scotland and Kast Anglia, where the finest
prime animals are produced.

Live-Stock Dealer. The dealer buys and sells store cattle, but
also buys fat cattle on the farms, at fairs, and at auction marts,
and sends them to a commission salesman or to a carcass butcher.

Live-Stock Auctioneer. There are about eight hundred live-
stock markets in England and Wales presided over by local
auctioneers, who usually have an extensive business in addition
to the auctioning of live stock. They belong to the Auctioneers’
Institute, an important body which played a large part in the
Army Cattle Purchase Scheme and in the Ministry of Food’s
Meat Control Scheme.

Slaughter-houses. There are about 14,000 slaughter-houses in
Great Britain, the greater number being privately owned and on
a small scale. Large up-to-date slaughter-houses are found in
many large towns, conducted by the municipalities or by joint-
stock companies. It has long been recognized that the methods
and equipment of British slaughter-houses are behind the practice
of many foreign countries. The absence of a sufficient number
of large central slaughter-houses proved an obstacle to the control
scheme and especially to the general introduction of the system
of selling on dead weight basis.

Carcass butcher. A butcher who buys live animals and sells
meat wholesale to retail butchers. He may at the same time sell
in his own retail shops.

Commission salesman. In Smithfield and other wholesale
meat markets, which exist in Glasgow, Birmingham, Cardiff,
Liverpool, Newcastle, and a few other large towns, there are
brokers and jobbers, as on the Stock Exchange and Produce
Exchanges. The former are called commission salesmen. They
receive carcasses on consignment from farmers and dealers, and
act as their agents in disposing of them wholesale. They also cut
up carcasses and sell them to retail butchers in sides and joints.

Meat importers. The large refrigerated meat companies have
freezing works in New Zealand, Australia, and South America,
where they buy direct from the farmers. They either import into
this country direct or employ their own agents. They sell their
frozen or chilled meat either at their own.stalls in the wholesale

THE MEAT TRADE AND WAR PROBLEMS 161

markets or direct to retail butchers. In recent years the large
American meat companies have established a strong position in
the English market and supply the bulk of the frozen beef which
comes from South America. The Colonial meat companies supply
frozen mutton rather than beef.

Retail butchers. Of these there are three classes : those who buy
only live animals and either slaughter them themselves or have
them killed in a public slaughter-house; those who are completely
dependent on the wholesale meat market and never buy live
animals; and those who make use of both sources of supply.
The last two classes, which are confined for the most part to large
towns and their neighbourhood, also buy frozen meat. The first
class is found principally in country districts, where live stock
can be readily obtained in the neighbourhood. Altogether there
are about 50,000 retail butchers in Great Britain. This gives an
average of about one butcher for every 800 of the population or
200 customers. With such a small average clientéle, it is not
surprising that before the war competition was very keen and that
butchers had to work hard for a living. Co-operative Societies
and multiple shops were taking away a growing part of the
trade, though both were handicapped by the difficulty of securing
competent and reliable managers, in a business where checks on
inaccurate accounting are difficult to impose.

In normal times supply and demand are regulated by price
fluctuations in the wholesale meat markets in London and
other large towns. Changes in the price of dead meat rule the
price of live cattle at the auction markets, which in turn deter-
mines the price which the butcher will pay when he buys direct
from the farmer. The price of fat cattle naturally governs
the value of stores. Before the war the level of prices in the
wholesale meat market was largely influenced by the selling
policy of the refrigerated meat companies. Of these the Ameri-
can companies selling beef from South America showed a ten-
dency to follow a common policy rather than to compete. It
was alleged, probably with good reason, that the American
meat combine could determine the price of beef and therefore
indirectly of live cattle and stores. On the whole perhaps the
farmer had more reason to complain that they kept prices low

1569.53 M

162 MEAT AND FATS

than the consumer had to resent their reluctance to compete.
Feeding beasts for slaughter was not a very paying proposition,
and was chiefly valuable to the farmer for the manure which he
obtained as a by-product. There have been few fortunes made in
the meat business either by farmers or butchers, nor was it a
congenial hunting ground for the speculator. Combination and
large-scale operations were the best way to make money; but
in the home trade, as there was no necessity for large freezing
works and packing plants, big aggregations of capital were
unknown, and cut-throat competition rather than combination
suited better the traditional individualism of the trade.

Apart, therefore, from the influence of the American meat
companies, which was on the whole a steadying influence on the
market, the conditions were favourable for the free play of supply
and demand. Distribution was automatically regulated by small
price fluctuations, and local deficiencies and surpluses righted
themselves by the opportunity they created for every enterprising
dealer to make a profit by attending to them. The meat trade
ran itself. Thousands of eyes were watching the daily price
fluctuations ; but no one man ever caught a bird’s-eye picture of
the trade as a whole, or had any responsibility for co-ordinating
the ceaseless activities of the swarm of operators and seeing
that the whole machinery functioned smoothly to attain any
concerted end.

The problem which the Food Controller had to face, and
which the experts of the Ministry of Food and the Board of
Agriculture were examining in May and June 1917, was to devise
some method by which this swarm of profit-seeking individuals
could be made to function as a single organic whole. If prices
were fixed and the free play of private initiative was destroyed,
was it possible to construct any machinery of distribution which
could take the place of the operation of economic laws ? Nothing
less than this was involved in the simple demand, which the
public and press kept urging upon the Government, that they
should fix prices and take control of the trade.

* The meat problem,’ said Mr. Clynes in a review of the activi-
ties of the Ministry of Food given in the House of Commons on
June 6, 1918, ‘ the meat problem in a nut-shell is this: we had to

THE MEAT TRADE AND WAR PROBLEMS 163

arrange that the required number of beasts and sheep should be
killed in 14,000 slaughter-houses and delivered, together with their
proportion of frozen meat, to 52,000 retailers’ shops through
2,000 Local Food Committee areas, and that must be done at the
right moment, or as near that as possible, in order to supply the
demands of 40,000,000 consumers.’ What constituted the chief
difficulty was that all this had to be done with fixed prices and no
profiteering. Distribution would take care of itself if left to
economic forces. To do it in any other way meant drastic reorgani-
zation of the trade, and that had to be done without interfering
for a single day with the supply of meat to the butchers’ shops.
Lord Rhondda, in a speech on the meat problem, once likened his
task to the rebuilding of a bridge without interfering with the
traffic.

It was here that the experience already gained by Lord
Rhondda and his assistants at the War Office in connexion with
wool and hides proved of great value. The first detailed sug-
gestions for a scheme of control were drawn up at the War Office
on June 1, 1917, and as they formed the basis of Lord Rhondda’s
subsequent policy and were ultimately put into practice sub-
stantially unaltered, the memorandum containing them is given
in full in Appendix 8.

As under the Wool Purchase Scheme it was proposed that
Local Executive Officers should be appointed to supervise the
sending of cattle to market, where they would be distributed at
fixed prices to butchers and salesmen by the auctioneer or market
superintendent. A Central Office in London would fix the quota
to be supplied from one area to another and prescribe the proper
channels of distribution. All dealers, salesmen, and butchers
would be licensed, and would be permitted to operate only within
the limits laid down. The experience gained in wool purchase
and the control of domestic hides proved that * the most practicable
method of State regulation is to make use wherever possible of
the existing trade channels of supply and distribution, and to
standardize these channels in such a way that every farmer and
authorized dealer knows at once exactly where he is to send his
produce and from whom he is to purchase it. Every trader is
then recognized as performing a service of national importance

M 2

164 . MEAT AND FATS

with the knowledge that his authority to deal may be cancelled
if he fails to carry out the instructions or evades the regulations
imposed.’ The essence of the scheme was to replace free choice
and private initiative by a system of fixed routines and prescribed
time-tables, much as if one should attempt to regulate the moves
ment of motor traffic on the roads by applying to them the
principles of railway management.

On the side of retail distribution the original scheme contem-
plated a more important part being played by Municipal and other
Local Authorities than proved feasible’ in practice. They were
to have power to open municipal butcher shops, to require private
butchers to amalgamate their businesses, to take over and control
the business of slaughtering, and to regulate retail prices. In
practice it was found that the Local Authorities were so burdened
with the heavy responsibilities arising out of the National Ration-
ing Scheme and other war measures that their part in the Meat
Scheme was mainly confined to the registration of butchers, the
issue of meat cards to consumers, and the supervision of the
system whereby consumers were tied to particular shops.

The scheme proposed that in the Metropolitan Area, in view
of the complications of local government and the magnitude of
the problem, a separate office should be set up to purchase the
whole of the supplies for London, employing wholesale butchers
and meat salesmen as authorized dealers on a commission basis.
This suggestion was ultimately realized by the creation of the
Smithfield Control Board.

On the crucial question of reducing and fixing prices the
original plan advocated a bold course. A drastic reduction in
price would satisfy the demands of the industrial population and
win the approval of the butchers, and at the same time would
inflict no real hardship on the majority of farmers. Under War
Office control the prices of hides was at that time 40 per cent.,
and of wool 50 per cent. above pre-war prices ; whereas the prices
of meat and cattle were more than 100 per cent. in excess of pre-
war values. The new level of prices should be based on those
ruling a year or two earlier, with an allowance for increased costs,
but some provisions would have to be made for cases where
farmers had bought stores for fattening at recently inflated values.

THE MEAT TRADE AND WAR PROBLEMS 165

It was argued that a drastic reduction in price would not, as in
other commodities, diminish the supply ; indeed, by making it
unprofitable for the farmer to continue fattening his stock, it
might even increase the available supply during the coming
months, when it was of the utmost importance that farmers
should put more land under the plough. At the same time, a low
price for cattle would discourage slaughter of milch cows and thus
help to protect the milk supply. If a reduction in prices led to an
increased rate of slaughtering, a reserve might be accumulated by
increasing cold storage facilities. ‘From the point of view of the
food supply as a whole,’ it was claimed, ‘a reserve of meat would
be more economical than a reserve of live cattle.’

The policy of reducing the herds in the country was in fact
adopted by the Government and gave rise to a storm of contro-
versy. In the meantime the immediate policy recommended was
to reduce prices step by step during the next six months. As to
the basis on which prices should be fixed the memorandum advo-
cated the live weight system, though it was recognized that,
where no weighing machine existed in a market, some form of
independent arbitration would be necessary. To discourage the
fattening of prime beasts (a practice that involved a waste of
feeding stuffs) a maximum price would have to be fixed for all
beasts over a certain weight. Wholesale meat prices, with allow-
ances for the cost of cartage, transport, warehousing, slaughter,
and the value of the offals, would be fixed so as to leave a reason-
able profit to the salesman. This might necessitate different
prices for London, large towns and country places, but something
might be done to equalize costs of transport by fixing a flat rate
for railway freight above a certain distance based on average costs.
Retail prices would be fixed to correspond with wholesale prices
im such a way as to leave a reasonable margin to the butcher,
based on his pre-war profit adjusted to cover increased costs.

Such, broadly, was the plan adopted. Many of the worst
difficulties that were anticipated proved less formidable in practice,
and fresh difficulties arose which none had foreseen. But though
the detailed methods of administration could only be learnt from
experience, the preliminary planning proved in this case to have
been conceived on the right lines.

CHAPTER XIV
THE PERIOD OF TRANSITION

Preliminary steps — Progressive reduction of prices — Live weight diffi-
culties — Criticisms of price policy — Reduction of herds — The glut and the
subsequent shortage — Appointment of Central Live Stock and Meat Trade
Advisory Committee — Standardization of cuts — Wholesale Meat Supply
Associations and their functions — Census of meat sold retail — Licensing and
registration of traders — Inadequacy of fixing retail maximum prices — Threats
of butcher’s strike — Limitation of consumption — Crisis in the last week of
December 1917 — Complete control established — State purchase of all live
stock for slaughter — Pooling expenses of distribution — The Central Live
Stock Fund — The meat trade as a national service.

THE scheme of control outlined in the previous chapter was
approved in principle early in July 1917. It now remained to
translate it into practice. For this purpose it was first necessary to
find and enlist the support of influential farmers and meat traders,
who believed not only that some form of control was necessary but
that the plan drawn up was on the right lines. In addition it was
necessary to select the right men to fill the responsible posts in the
administrative machine which it was proposed to set up. These
two initial difficulties proved formidable. The third task, which,
though it took less time to complete, aroused such a storm of
protest that at one time it looked as if the whole scheme of control
would be wrecked, was the fixing of maximum prices on a descend-
ing scale monthly from September 1917 to January 1918. Fourthly,
arrangements had to be made for the registration and licensing
of all butchers, wholesale traders, auctioneers, cattle-dealers,
owners of slaughter-houses, and others engaged in the meat trade.
And, fifthly, before the scheme could be brought into effect it was
necessary to take a census of all the cattle and sheep on every
farm in the country, and at the same time to ascertain from every
retail butcher the extent of his normal weekly turnover.

With this programme to carry out, it is not surprising that the
Ministry took six months, from July to December, in which to
complete its preparations. Another three or four months elapsed
before the reorganization of the trade could be regarded as com-

THE PERIOD OF TRANSITION 167

plete, and the machine had settled down to a more or less regular
routine. This period of transition throws light on some of the
difficulties attending so ambitious a scheme of State control and
the novel and often make-shift devices which were necessary to
cope with them.

Early in August the plan was to bring prices down to a level
based on cost of production by monthly reductions, the final stage
being reached in January with the maximum price of 60s. per live
cwt. The stages were as follows :

First grade cattle yielding
more than 53 per cent. dead meat
8.
74 per cwt. live weight

September . aie ot: y

October 5 6 ‘ 5 44 29 2” 2?
November . : : : 67 oF: ” >
December . 4 F : 67 29 > 2
January. : F : 60 Ay ep 2

The prices for September and October were based on the recom-
mendation of the Army Cattle Committee. These prices were
arrived at as the result of a careful comparison of the market prices
of stores and fat cattle over a period of several months, and
calculations of the relationship which should exist between the
values of meat, milk, and grain. For the latter months the Food
Controller’s reason for a further drop was that the market price
of stores, which had been unduly inflated, might reasonably be
expected to fall to a level corresponding with the future maximum
prices of fat cattle. At the level so reached the value of both stores
and fat cattle would still cover their cost of production, taking into
account the percentage increase in the cost of wages and feeding-
stuffs. Compared with the prices ruling in January 1914 the figure
of 60s. represented an increase of 63 per cent., which was estimated
to correspond fairly accurately with the average increase in
agricultural costs.

1 This Committee was appointedon April 25, 1917,to arrange for the purchase of about
250,000 cattle on which to feed the Army for five months while reserve stocks of frozen
meat, diminished by shipping losses, were being replenished. This amount represents
about 10 per cent. of the number of cattle annually slaughtered in the United Kingdom.
The method of purchase adopted was to appoint local Buying Committees in each
county under the chairmanship of a live stock auctioneer nominated by the Auctioneers’
Institute. The experience gained from the administration of this scheme proved very
valuable to the Ministry of Food. See Part I of the Report of the Army Cattle
Committee, Board of Agriculture and Fisheries, 1918.

168 MEAT AND FATS

These prices having been determined as the basis, it was
necessary to consider how best they could be enforced. Under
the Army Cattle Purchase Scheme all that was necessary to
enforce them was to instruct the Army buyers that they were
not to pay more, and that they were to obtain authority to
requisition if necessary. Even for the Army, however, there was
the difficulty that weighing machines did not exist in many
markets, where transactions normally took place not by weight
but at so much per head of cattle. The Committee managed to
get over this difficulty by obtaining the permission of the railway
companies to use the weighing facilities in railway stations wher-
ever that course was desirable. They added in their Report.
however, that, though by this means it was possible to fix the
price per cwt. live weight for army cattle, ‘ the weighing facilities
would be entirely inadequate for a similar measure to be extended
to civilian supplies.’! The cattle to be purchased for the Army
were all of about the same grade, viz. yielding 53 per cent. of
meat in the dressed carcass, and the buyer was responsible to
the Government for estimating the yield to the best of his ability.
For civilian supplies, however, it was thought that the estimate
of the yield would have to remain a matter for bargaining between
the farmer and the butcher.

In the absence of an official system for determining the
grade of each animal, it was therefore impossible to attempt
to enforce a scale of maximum prices for live weight varying
according to the grade of the animal. On the other hand, to
ignore all differences in grade and quality would have been unfair
both to buyer and seller. It would have meant that a lean or
bony old cow would sell for as much as or more than a well-fed
young steer. Clearly, therefore, until control could be extended
to the actual grading and valuation of every animal in the markets,
the only prices that could be fixed with any hope of enforce-
ment were the wholesale prices for dead meat. This was the
course actually adopted. While an announcement was made that
the prices to be paid by the Army would be according to the scale
given above, an Order was issued on August 29, 1917, fixing legal

1 Op. cit., p. 14.

THE PERIOD OF TRANSITION 169

maximum prices for dead meat in the wholesale market according
to a prescribed schedule.

By the same Order Food Control Committees were empowered
to lay down schedules of local maximum prices for retail sale,
which had to be submitted for approval to the Food Controller.
The margin of profit allowed to the retailer was fixed at 20 per cent.
on the wholesale price.

This is not the place for attempting to appraise the price policy
of the Government in all its bearings. It is necessary, however,
for an understanding of the subsequent course of control to
summarize the reasons which were advanced at the time for and
against the gradual reduction decided upon. In the first place
it is clear that Lord Rhondda’s policy was endorsed by the
Government as a whole. Lord Milner, in his speech in the House of
Lords on February 28, 1918, explained that after hearing the views
of Mr. Prothero, then President of the Board of Agriculture, and
of Lord Rhondda the Food Controller, he took the final decision
on behalf of the Government.1_ The two chief justifications were,
first, the need of allaying discontent on the part of the general
public by a serious attack on high prices, and secondly, the
desirability, and indeed the necessity, in view of the shortage of
animal feeding stuffs, of bringing about a reduction in the herds
of the country. This policy had already been endorsed by the
Board of Agriculture when they gave their consent to the proposal
for an additional slaughter of 250,000 cattle, representing 10 per
cent. of the normal kill in a year, for the purpose of feeding the
Army on fresh meat. Professor Wood, Chairman of the Army
Cattle Committee, had pointed out the wastefulness of feeding
animals till they reached a prime fat condition, owing to the
limited supply of imported feeding stuffs for which shipping space
was available. The falling scale of prices had therefore a two-
fold object: first, to bring prices down to a reasonable level,
based on costs of production, without inflicting hardship on farmers
who had recently paid very high prices for stores ; and, secondly,
to increase the rate of kill during the last three months of 1917,
so as to provide a surplus for Army needs. It was realized that
one of the effects of the policy would be to bring about a compara-

1 Parl. Debates, H. of L., 1918, vol. xxix, cols. 205, 206.

170 MEAT AND FATS

tive shortage in the early months of 1918. A shortage during
these months in home produced meat is largely seasonal, and is
usually met by increasing supplies of frozen meat. In 1918,
however, owing to the submarine campaign, the Government had
every reason to husband its reserves of frozen meat most care-
fully. Lord Rhondda was therefore able to maintain against his
critics that though the shortage in the early months of 1918 was
admittedly due in part to his Orders, the policy he had pursued
was deliberate and, in view of the shipping position at the time,
to a large extent inevitable.

These considerations failed to impress the opponents of the
policy. They prophesied that the falling prices during the autumn
of 1917 would lead to the slaughter of large numbers of immature
cattle, which would not only cause a severe shortage in the
immediately succeeding months, but would have a permanently
depressing effect on a staple branch of agriculture. It was argued
that so low a price as 60s. per cwt. in January would mean a meat
famine in the spring and early summer of 1918, and that the
farmer could not be expected to fatten his cattle when he seemed
to be faced with the prospect of certain loss in a few months’ time.
Already in August and September it was said that the large number
of immature cattle which were being sold in the markets showed
that something like a panic had set in and that farmers were
realizing as fast as they could. In afew months, it was prophesied,
there would be practically no fat cattle available and the country
would be dependent on lean store cattle. If such expectations
were realized, there was danger of an extremely serious diminution
in the live stock of the country, and when the industrial population
found that the Food Controller’s short-sighted policy had dried
up the sources of supply of fresh meat, they would have little
cause to thank him for having at the same time reduced the level
of prices.

This line of reasoning ignored an important element in the
situation, namely, the effect of the policy on the market price of
store cattle. It was by no means obvious that it would pay the
breeder to give up his business rather than accept a considerably
lower price for his store cattle. If graziers decided that they were
not going to continue fattening cattle witha prospect of certain

THE PERIOD OF TRANSITION 171

loss, and if in consequence the majority of graziers refused to buy
store cattle, there would be a heavy slump in the price of stores.
This process had in fact already begun as soon as the maximum
price of 60s. per cwt. for January was announced. It was obvious
that as the price of young beasts fell, there would come a point
when graziers would start to buy again, as soon as they saw their
way to make a profit by selling later on at the new level of prices.
The question therefore resolved itself into an inquiry as to
whether 60s. per ewt. was sufficient to cover the cost of producing
a fat beast from birth to maturity and at the same time leave
a fair margin of profit to both breeder and grazier. Conditions
varied so much that no exact reply to this was possible, but the
balance of expert opinion favoured the affirmative. Partly,
however, owing to the doubt on this point, and partly to reassure
the farmers by making a politic concession in the face of the strong
protests that had been evoked, Lord Rhondda on October 9
withdrew the price of 60s. for January and left the maximum at
the December figure of 67s. per live cwt.

As regards the introduction of control over distribution the
position in August was reassuring. The complete organization
could not be ready for several months, but the prospect of a
temporary excess of supply rendered detailed control of distribu-
tion unnecessary. So long as there was no shortage, supplies
could be trusted to find their way through their accustomed
channels. The essential task at the moment was to complete the
necessary preparations for later control, and in particular to
appoint the local officers, whom it was decided to call Live Stock
Commissioners, and install them in convenient offices in each area.
A large number of qualified experts were interviewed. Those
finally selected were for the most part estate agents, who had had
experience of Government administration as Agricultural Com-
missioners under the National Service Act. Two were civil
engineers, and one, who became the Chief Live Stock Commissioner
for Scotland, was a prominent farmer who had served on the
Scottish Central Wool Advisory Committee. Pending the com-
pletion of arrangements for local offices and staff, the Live Stock
Commissioners worked at head-quarters elaborating the details
of the scheme for live stock control. Preliminary steps were also

172 MEAT AND FATS

taken at this time to enlist the support of live-stock auctioneers
throughout the country, and preparations were made for a census
of live stock which necessitated the printing of about a million
census forms.

Early in October the Central Live Stock and Meat Trade
Advisory Committee was set up, consisting of representatives of
farmers, auctioneers, meat importers, meat salesmen, retail
butchers, co-operators, journeymen butchers, and officials of the
three Boards of Agriculture and of the Ministry of Food. Its
function was to advise the Ministry on all questions relating to the
production, supply, and distribution of meat. It became in a real
sense the Live Stock and Meat Trade Parliament. No Order
affecting live stock or meat supplies was made by the Food Con-
troller without being discussed and approved by this body.
Without the opportunity it presented of ventilating grievances
and reconciling divergent interests, the drastic powers which the
Food Controller possessed would have been invoked in vain.
Undiluted bureaucracy would certainly have failed. Success
depended on obtaining the most representative opinion of those
engaged in the trade and on winning their hearty support, or
at least patriotic acquiescence, in carrying out the measures
proposed.

An example of the kind of measure which greatly simplified
control, but could only be introduced with the goodwill and co-
operation of the trade, was the standardization of trade customs.
Meat is sold wholesale not only in carcasses, but in sides and large
jomts, cut to suit the convenience of the retail butcher. The
method of cutting was found to vary in different parts of the
country, thus rendering the drawing up and enforcement of
wholesale maximum prices very difficult. One of the first tasks
of Sir Francis Boys, K.B.E., who was appointed Director of Meat
Supplies in October 1917, was to standardize the cuts to be used
in the wholesale trade throughout the country and to fix wholesale
maximum prices for these cuts. Though the names of the different
jomts continued to vary, the trade agreed to unify its methods of
cutting. Retail maximum prices were at that time being fixed by
local Food Committees to meet local requirements. Model scales
were drawn up in the Ministry and every local scale had to be

THE PERIOD OF TRANSITION 173

submitted for approval to an expert in the Ministry before being
enforced. This involved a large amount of labour which totally
disappeared when later, owing to the standardization of wholesale
cuts and the averaging of costs of distribution in the manner to be
described, it was found possible to introduce practical uniformity
in retail prices for the whole of Great Britain.

During November active steps were taken to organize Whole-
sale Meat Supply Associations in the eight centres of wholesale
distribution. Every wholesaler was required to join one of these
Associations as a condition of his licence. The Memorandum and
Articles of Association of these bodies, which were drawn up
in consultation with the legal advisers of the Ministry, gave
the Food Controller a share in their control. Their creation
was an essential step in the direction of integration and unitary
control, and away from the competitive individualism which had
hitherto characterized the trade. The principle of throwing as
much responsibility as possible upon self-governing associations
of traders, organized for the purpose of performing an essential
public service, was one of the lessons which the experience of
Wool Control had emphasized. The Wholesale Meat Supply
Associations, which acted partly as agents, partly as contractors
to the Government, provided a solid backbone for the scheme
of control. They put up a financial guarantee backed by all
their members, and were held responsible for the performance
of many onerous duties, which it would have been impossible
for a Government Department to carry out. By centralizing
information, acting as a single channel of communication, and
co-ordinating the operations of their members in the fulfil-
ment of a definite programme, they provided a sort of General
Staff for the meat trade in their area. But unlike the General
Staff of the Army, their directors, councillors, and committee
men were appointed by and responsible to the members of
the trade. Their principal functions were to receive meat
purchased on behalf of the Ministry, either on the live weight basis
from markets or on the dead weight basis from Government
authorized slaughter-houses; and to distribute such supplies
among their members in accordance with a programme laid down
by the local Meat Distribution Committee, consisting of the Live

174 MEAT AND FATS

Stock Commissioner, the Area Meat Agent, and representatives
of meat importers, wholesalers, and retail butchers.

Another important step taken during November was a census
of meat bought and sold by retail butchers in the four weeks
ending October 27. The Local Food Committees were made
responsible for the distribution and collection of returns. This
census of consumption was made the basis of distribution to
retailers, pending the introduction of the National Rationing
Scheme. Before the end of November Orders had been made and
the necessary measures taken to register and license all persons
engaged in the cattle and meat trade. During November and
December the question of issuing an Order restricting the slaughter
of animals was discussed by the Ministry of Food and the Board
of Agriculture, but strong objection was urged on behalf of the
farmers against any interference with the rate of slaughter. On
December 11, however, owing to a rise of prices in the live-
stock markets, the Food Controller issued an Order restricting the
sale of meat by retail butchers to the amount of meat sold by
them during an equivalent period in October.

All this time continuous work was being done in completing
the final details for the introduction of complete control over the
purchase of cattle and the distribution of meat from the farm to
the butcher’s shop. The day was rapidly approaching when the
temporary glut would give place to scarcity and the new machinery
of distribution would have to be brought into operation immedi-
ately, if maximum prices were to be maintained and the general
shortage was to be fairly equalized over the whole population.
The amended scheme in its main outlnes was approved by the
Central Advisory Committee early in December. Great difficulty
was experienced in deciding the issue of live weight versus dead
weight. The majority of experts advocated the latter, but it was
obvious that its general introduction would have involved a
revolution in the habits of the farmer, and would have necessitated
the construction of a number of additional central slaughter-
houses. There were also technical objections arising out of trans-
port difficulties and the absence of refrigerated cars. On the other
hand, purchase by live weight presented serious difficulties and
was regarded as unfair to butcher and farmer alike. There were

THE PERIOD OF TRANSITION 175

very few experts qualified to estimate the yield of dead meat in
a live beast. Experiments carried out under the auspices of the
Army Cattle Committee had demonstrated how easy it was to
miscalculate. Professor Wood, the Chairman of this Committee,
and many other agricultural experts favoured the dead weight
system as being the only fair method. Moreover, there were many
parts of the country where weighing machines suitable for weighing
live cattle did not exist. In these circumstances a decision as to
the exact procedure to be adopted was postponed to the very
last moment.

Hitherto, though maximum prices had been fixed by law for
wholesale and retail sales of dead meat, the corresponding prices
per cwt. live weight were not legally binding and were only
observed by the Army buyers. Many people, indeed, were of
the opinion, which they professed to deduce from economic first
principles, that so long as the price of meat was fixed in the shop
there was no need to interfere with the price of live cattle. It was
argued that no butcher would be foolish enough to pay more for
his cattle than he could afford, having regard to the price at which
he could sell. Therefore, since all butchers were in the same
position, and there was no other outlet for the cattle offered for
sale, the market price could not rise above a figure which would
just leave the ‘ marginal’ butcher a reasonable margin of profit.
This a priori line of reasoning proved to be quite fallacious.
Competition between butchers was so keen and their natural
desire to retain their customers and trade connexions was so
strong, that they did not hesitate to bid against one another even
to the extent of forcing the price up to a level which left them
with the prospect of certain loss on resale at the maximum
prices. This gave the financially strong firms a big advantage
over their weaker rivals. Some of the big West End stores and
multiple shops were stated to be losing as much as a thousand
pounds a week in their determination to maintain their trade.
The operation of uniform maximum prices also penalized the
towns as against the country. When, as during the autumn
months, supply exceeded demand, distribution took place smoothly
enough. But now that the temporary glut of cattle was over
and prices of live stock rose in the country markets to a level

176 MEAT AND FATS

which left little or no profit to butchers, there was no margin
to cover the cost of transport to thickly populated districts. So
long as high prices could be obtained locally, the town butcher
had to go short or make a certain loss, while the country butcher
with lower handling charges. was still able to carry on.

In December the position was rapidly becoming impossible.
In London threats were heard of a butchers’ strike, unless some-
thing was done to relieve them. Clearly, if maximum prices were
to be maintained, control would have to be extended to the live-
stock markets, and butchers, instead of competing against one
another, would have to be guaranteed a fixed quota based on
their normal requirements.

As a temporary measure of relief it was decided to reduce the
demand in two ways. First, an Order called the Meat (Restriction
of Retail Sales) Order was issued on December 11, 1917, limiting
the quantity of meat which a butcher might sell in the four weeks
ending January 13th to the quantity of meat which he sold in the
previous October. This was specially designed to prevent the
seasonal increase in consumption which usually takes place during
the Christmas holidays. Secondly, under the Public Meals Order,
1918, one meatless day each week was prescribed for public
eating-places, and the amount of meat which might be served to
each customer was restricted to 3 oz. uncooked at luncheon and
the same at dinner. These measures did something to restrict
demand during the most anxious period, but they did little to
check uneven distribution. Meat queues came into existence in
London and the large towns, and many butchers were closing
their shops.

The Central Advisory Committee, which was reluctant to take
the final plunge before a more satisfactory solution had been
found for the technical difficulties of valuation, proposed that an —
interim Order should be issued limiting the price paid for a beast
for slaughter to the equivalent of 1s. per lb. dead weight together
with a sum not exceeding 2d. per lb. on the weight of the dressed
carcass for offals. It was hoped that this would do something to
stop the forcing up of prices in the markets; but since in the
absence of any official valuation it left the determination of the
yield a matter for bargaining between buyer and seller, not much

THE PERIOD OF TRANSITION 17

faith was placed in its efficacy, and though the Order was signed
on December 24 it was never issued. In practice it would have
been impossible to enforce. Until the Government was in a
position to intervene between buyer and seller and establish some
system of official valuation and allocation, it was recognized that
no mere edict could prevent competition forcing up prices and the
larger buyers obtaining more than their fair share of supplies.
Meanwhile, the position was becoming every day more critical.
At the end of December it was seen that drastic action had to be
taken at once.

The final details of the complete scheme were worked out on
Christmas Eve and telegraphed all over the country at 2.30 a.m.
on Christmas Day. The Government was to buy all live stock
from the farmers, pool all the intermediate expenses of transport
and distribution, and resell to butchers at fixed prices which should
be uniform throughout the country. Live-stock auctioneers were
appointed Government agents, and official Grading Committees
consisting of a farmer, a butcher, and the auctioneer were set up
in every market to grade and weigh all beasts for slaughter.
Certain exceptions were made in the case of markets where there
were no weighing machines and in places where the practice had
been to buy and sell on the dead weight basis. The text of the
Order under which this action was taken is the Cattle (Sales)
Order, 1917.1. The same system was applied to sheep a month
later under the Sheep (Sales) Order, 1918.7

The pooling of intermediate expenses, in order to maintain
a uniform price to the farmer and uniform prices in the butchers’
shops throughout the country, involved the setting up of a national
pool, which was called the Central Live Stock Fund. By means
of this institution the meat trade of the country was virtually
conducted as by one gigantic multiple shop, its relations with
retailers bearing some resemblance to those of the Imperial
Tobacco Company, with its complete control of supplies and its
uniform retail prices and fixed agency terms. The pooling of
distribution costs proved a wise course. It gave elasticity to the
scheme, rendered changes of price and of policy possible without
having to consider vested interests and individual hardships, and

1 Appendix 9. 2 Appendix 10.
“1569.53 N

178 MEAT AND FATS

made it possible to guarantee fixed remuneration to the many
different categories of middlemen engaged in the process of
distribution. The meat trade of the country from this time
onwards began to function for the nation much as the Army
Service Corps was functioning for the Army at the front. The
majority of its members had given up their private businesses
and were enlisted for national service.

CHAPTER XV
MEAT CONTROL IN OPERATION

The crisis surmounted — Complete control established — Organization of
live stock control — Duties of auctioneers — Grading committees and schedule
of prices — Allocation to butchers — Farmers Selection Committees — Assess-
ment of supply quotas — Regulation of demand — Meat rationing introduced,
February 1918 — Registration of customers — Meat permits — Machinery of
distribution, in Food Committee areas, in Live Stock areas, and at head-quarters
— Functions of Meat Agents, Wholesale Meat Supply Associations, Importers
Committees, National Meat Distribution Committee — Government slaughter-
houses and the dead weight system — Smithfield Control Board — Central Live
Stock Fund — Meat finance — Irish imports — Frozen meat imports.

WuEN the live stock and wholesale meat markets reopened
on December 27, after the Christmas holidays, the new machinery
which had been set up was suddenly brought to the test. Anxious
days and nights were passed at head-quarters; crises followed
one another in bewildering succession; but in spite of local
shortages, misunderstandings, and much impatience at the com-
plexity and novelty of the scheme, there was never any serious
danger of a breakdown. The scheme worked surprisingly well,
even in the early stages, owing to the loyal response of the
auctioneers and meat traders throughout the country. Meetings
of farmers were held in which the necessity for and the working
of the scheme were explained. The Wholesale Meat Supply
Associations not only secured the co-operation of their members,
but from the first showed common sense and initiative in
improvising ways out of local difficulties without waiting for
instructions from head-quarters. Area Live Stock Commissioners
and their staffs made it a point of honour to settle as many
problems as possible on the spot without referrmg to Whitehall.
Though the supplies of meat continued very low during January
and February, it was possible, owing to the complete control now
exercised and the exact information available as to supplies, to
deal with the most serious cases of shortage by sending surpluses
from exporting areas and by dispatching emergency supplies of
frozen meat. From that time on the position steadily improved.
The intervention of head-quarters became less and less called
upon, with the result that the staff at the Central Office was

N 2

180 MEAT AND FATS

gradually reduced. Co-ordination was secured by periodical
conferences of Live Stock Commissioners. Day to day adminis-
tration was devolved on the district offices, while head-quarters
concentrated on problems of general policy and acted as a central
clearing-house of information and statistics.

In April 1918, with the setting up of the Smithfield Control
Board, the main lines of the organization were firmly established.
It will be useful to give a survey of the whole mechanism and show
how the various parts functioned in relation to one another. The
scheme falls into three parts :

1. The creation of a territorial organization for the control of

the supply of live stock.

2. The introduction of national rationing for the control of

demand.

3. The re-organization of the meat trade for the regulation

of distribution.

Live Stock Control

For the purpose of live stock control Great Britain was
divided into fourteen live stock areas, thirteen in England and
Wales, and one in Scotland, each under the charge of a Live
Stock Commissioner. Scotland was subdivided into six districts
under Deputy Commissioners. Live Stock Areas were again
divided into Chairman’s Sections, under the supervision of
a Chairman of Auctioneers. A Chairman’s Section corresponded
as a rule to a county, and was subdivided into Market Districts
under Deputy Chairmen, each embracing a number of Rural
Districts or Food Control Committee Areas. In these market
districts there might be one or more live stock markets. Assisting
each Live Stock Commissioner was an Area Live Stock Advisory
Committee, whose duty was to advise him on all matters arising
out of the supply and distribution of live stock in the Area. It
consisted of two farmers, one auctioneer, and one butcher from
each county in the Area, and two cattle-dealers chosen from the
whole Area, the members. being nominated by their national or
local associations.

The Live Stock Commissioner was responsible for the successful
functioning of meat and live stock control in his Area. With the

td

MEAT CONTROL IN OPERATION 181

assistance of his Sub-Commissioners he supervised the operations
of live stock auctioneers, including the Chairman, Deputy Chair-
men, and individual auctioneers and cattle salesmen. In consulta-
tion with his Advisory Committee he had to assess the quota of
live stock which each market district must furnish, to determine
within the Area which markets should supply the needs of each
Food Control Committee Area, to direct the transfer of stock
either to meet deficiencies in his area, or to another Area in
accordance with instructions received from the Chief Live Stock
Commissioner, and to collect and report to head-quarters exact
information as to the number of cattle coming forward and the
number likely to be available for slaughter within the next few
weeks. The Live Stock Sub-Commissioners acted as deputies and
in particular looked after the system of grading and valuation.

The control of the markets was exercised by the Live Stock
Auctioneers, organized into district groups under the direction
of a Chairman for the whole county and a Deputy Chairman for
each market district. They were not paid direct by the Govern-
ment, but received their remuneration from their national organi-
zation, the Auctioneers Institute, which made a collective contract
on behalf of its members, and received out of the Central Live
Stock Fund a sum of 6s. per head for cattle and 9d. per head for
sheep on all live stock for slaughter which passed through the
markets. These sums were paid into the Auctioneers’ Pool. Out
of this Pool the Auctioneers Institute paid the remuneration of
its members, including Chairmen and Deputy Chairmen, in such
a way as to avoid inequalities and to apportion losses and com-
pensation as evenly as possible over all. This was all the more
necessary since some markets lost much of their business, some
were closed altogether, and others had a greatly increased number
of stock passing through them.

The duty of the auctioneer was to act as Government agent
for the purchase of live stock from the farmer and re-sale to the
butcher. Animals were graded by a Grading Committee con-
sisting of one farmer, one butcher, and the auctioneer, and were
placed either in first, second, third, or fourth grade according to
the estimated yield of dead meat on the animal. For each grade
a separate price per cwt. was fixed under the Cattle (Sales)

182 MEAT AND FATS
Order, 1917. The first schedule of prices appended to the Order

was as follows :
ScHEDULE OF Maximum PRICES
Bulls, bullocks, and heifers

Grading Price per cwt.
lst Grade, 56 per cent, and over. 7 c 758.
2nd Grade, 52 per cent. to 56 per cent. . 5 70s.
3rd Grade, 48 per cent. to 52 percent. . : 65s.

_ 4th Grade, under 48 per cent. c : . as valued

Cows
Grading Price per cwt.
Ist Grade, 52 per cent, and over . : : 70s.
2nd Grade, 46 per cent, to 52 per cent. . - 62s.
3rd Grade, 42 per cent. to 46 percent. . : 53s,
4th Grade, under 42 per cent. 5 - . as valued

After the grading was completed, the farmer received payment
on presentation of a certificate signed by the auctioneer, which
could be cashed either at the auctioneer’s office or at the market
bank. After the animals had been graded and paid for, the
auctioneer’s next task was to allocate them among the buyers
present, all of whom were required to hold buying permits
authorizing them to buy up to a certain quantity. To assist him
in this role an Allocation Committee was appointed in each
market consisting of three persons: one representing the buyers
for local butchers’ committees, one the buyers for Wholesale
Meat Supply Associations, and one representing the consumers’
interest. (It sometimes happened that the buyer for the wholesale
butchers in a distant town, being in a minority, had to be content
with what was left after the local butchers had taken their pick.
If complaints on this score became frequent, the Chairman or
Deputy Chairman would be asked by the Live Stock Commissioner
to intervene.) The buyers were required to pay the purchase price
which the farmer had received, with the addition of a fixed ‘ per
head charge ’ of 30s. for cattle and 3s. 6d. per head for sheep, for
which the auctioneer had to account to the Central Live Stock
Fund. In return the butcher might recover certain expenses,
e.g. for droving, lairage, and slaughter-house dues, on production
of vouchers signed by the auctioneer who sold the cattle, and was
entitled to free transport on the railways for any beasts for which
he held a consignment note issued by the auctioneer. If the

MEAT CONTROL IN OPERATION 183

number of beasts coming into the market was in excess of the
needs of the buyers present, the surplus would be reported
immediately to the Live Stock Commissioner, who would give
instructions as to its disposal. Occasionally it was necessary to
return stock to the farmers, but this caused dissatisfaction, and
efforts were always made to absorb the surplus elsewhere, either
by sending them alive to some other market, or by having them
killed in a Government Authorized Slaughter-house and dispatched
as carcasses to the order of one of the Wholesale Meat Supply
Associations.

Records and vouchers were collected by the Chairman of
Auctioneers, who received a special allowance for the extra
clerical assistance required. The business of the Deputy Chair-
man, besides looking after the procedure at the markets in his
district, was to endeavour to control the number of stock for-
warded and to maintain a regular supply. For this purpose he had
to obtain information from the neighbouring farmers as to the
cattle and sheep they were likely to have ready during the next
few weeks and to regulate the flow to meet the demand. To
assist him in this task Farmers’ Selection Committees were
appointed, who advised him as to the steps necessary to procure
for the market the weekly quota of supplies for which the district
had been assessed. In some places the Deputy Chairman held
meetings of all the farmers in the district, to explain his require-
ments and settle with them the number of stock which each would |
get ready for slaughter during the next few weeks. By this means
a definite programme was laid down, and in the smaller market
districts the Deputy Chairman could almost identify the animals
which he expected to find each week in the market.

Assessment of Supply Quotas

As a result of the census taken on December 2, 1917, the
Live Stock Commissioners had in their offices full particulars
of the number, sex, age, condition, &c., of the cattle and sheep
on the farms and small holdings in their areas. On the average
there were about 30,000 farmers in each Live Stock Area. Every
return was registered and card-indexed under the farmer’s name.
A summary of the results divided into counties was sent to

184 MEAT AND FATS

head-quarters,' where the figures were correlated with statistics
of the population. With these figures before them an Assess-
ment Committee drew up a table showing which Areas were
self-supporting, which showed deficiency, and which had a sur-
plus available for dispatch elsewhere. Seasonal changes, and
examination of the figures of stock grouped according to age,
necessitated different tables for different times of the year.
Broadly, the exporting areas were found to be Scotland, Cumber-
land and Westmoreland, North Wales, West Midlands, the South
Western Counties, and East Anglia. In addition, Ireland supplied
a large surplus for export. The importing Areas were Northum-
berland and Durham, Lancashire and Cheshire, Yorkshire and
East Midlands, and the two Areas which made up London and
the Home Counties. A provisional assessment was made, appor-
tioning the quota which each Area was expected to yield, and
notified to each Live Stock Commissioner. The Area Live Stock
Advisory Committee then considered whether the quota was
reasonable, and when agreement was reached, the Live Stock
Commissioner in turn made his assessments for each county and
for each market district. When these had been fixed it was the
duty of each Deputy Chairman to see that the supplies were
forthcoming.

Regulation of Demand

On February 25, 1918, individual rationing of meat was first
introduced under the London and Home Counties Rationing
Scheme; on April 7 the system was applied to the whole of
Great Britain. Applications for meat cards were issued to all
householders to be filled in and returned to the Executive Officers
of the two thousand Food Control Committees, who then issued
meat cards to the applicants. The applications provided more
exact statistics of the population than had hitherto been available
and gave reliable data on which to base the requirements of each
district and Area.

It was not sufficient, however, for each individual to be
limited to the purchase of the amount specified on his ration
card. If the meat coupon was to be strictly honoured, it was
necessary to know where it would be presented. Consumers
were therefore required to register with a particular butcher, and

MEAT CONTROL IN OPERATION 185

were only allowed to change their choice every six months or so.
By this means every butcher knew the exact number of customers
for whom he had to provide, and informed the local Food Office
accordingly. This information was transferred to the Deputy
Meat Agents responsible for local distribution of meat; and
the butcher obtained a permit to buy either so much live stock
or so much dead meat per week. If he desired to buy dead meat,
he registered with a wholesale supplier, who in turn notified the
Meat Agent of the number of retail butchers registered with him,
and obtained his weekly quota of supplies through the agency
of his Wholesale Meat Supply Association. By this means the
total requirements of each Area were obtained, and could be
checked against previous estimates based on figures of population
and numbers of ration cards issued. It was generally found that
the actual amount demanded was less than the estimated require-
ments. This was due to the fact that when the ration was one
pound, and even when it was only three-quarters of a pound per
‘ head per week, a certain part of the population, especially in
Scotland and in some country districts, did not choose, or could
not afford, to purchase the full amount to which their ration
entitled them.

Regulation of Distribution

Two conditions for regulating distribution were fulfilled by
obtaining control of supplies at the source and by limiting demand
to an ascertained amount. It is now necessary to examine the
mechanism by which the intermediate stages of distribution
were effected. The links in the chain were as follows :

Head-quarters : Director of Meat Supplies and Chief

Meat Agent.

National Meat Distribution Com-
mittee.

Associated Importers Committee.

Live Stock Areas : Area Meat Agent.

Local Meat Distribution Committee.
Wholesale Meat Supply Association.
Local Meat Importers Committee.
Food Committee Areas: Deputy Meat Agent.
. Butchers Committee.

186 MEAT AND FATS

Food Committee Areas

Retail Butchers Committees were formed at the instigation
of the Ministry to facilitate local distribution. Instead of buying
individually butchers were grouped together and appointed
a joint buyer. Wherever possible a single buying permit was
issued to the butchers in each Food Committee Area, in which
case the dividing up of the stock purchased amongst the in-
dividual members was performed by their own representative
Committee. The business of the Deputy Meat Agent, who
was a meat trader appointed as a whole-time official by the
Ministry, was to look after the requirements and supplies of a
group of Food Committee Areas and their Butchers Committees.
He had to obtain from the local Food Committee particulars as
to the number of customers registered with each butcher; to
ascertain from the butchers the amount of live stock or dead
meat which they required to meet their customers’ weekly
rations ; to check these demands and see that they were reason-
able—a task which only an expert in the meat trade could carry
out ; to issue buying permits to individual butchers or to Butchers
Committees ; and to see that they obtained their share of live
stock in the markets or their quota of dead meat from the Whole-
sale Meat Supply Association. Any shortages or complaints he
had to investigate on the spot and report upon to his immediate
superior, the Area Meat Agent.

Live Stock Areas

The Area Meat Agent was an expert in the meat trade on
the staff of the Live Stock Commissioner, and reported on
technical matters to the Chief Meat Agent at head-quarters.
His business was to supervise the Deputy Meat Agents and
the issue of buying permits to the butchers in the Area; to
draw up in consultation with the Live Stock Commissioner and
the auctioneers the plan whereby each group of butchers was tied
to a particular market ; to co-ordinate the supply of live stock
and dead meat for the butchers in his Area; to make good any
deficiency of live stock by arranging through the Area Meat
Distribution Committee for a supply of dead-‘meat ; and generally

MEAT CONTROL IN OPERATION 187

to deal with any shortages or complaints that might arise, so far
as retail butchers were concerned.

The chief organ of local meat distribution was the Area Meat
Distribution Committee. There were nine of these in Great
Britain corresponding to the number of Wholesale Meat Supply
Associations, certain Live Stock Areas being amalgamated for
dead meat purposes. These Committees consisted of the Live
Stock Commissioner, the Divisional Food Commissioner, the Area
Meat Agent, representatives of the American and Australasian
meat importers, of the Wholesale Meat Supply Association, and
of the retail butchers in the Area. They thus included repre-
sentatives of those responsible for the three main sources of
supply : live stock, home-killed meat, and imported frozen meat.
So far as supplies in these three forms existed in the Area, it was
the business of the Committee to arrange for adjusting their
distribution. Local deficiencies in live stock were made good by
transferring stock from another district or by sending supplies of
home-killed meat or frozen meat. Instructions for the transfer
of live stock were given by the Live Stock Commissioner to his
Chairmen and Deputy Chairmen of Auctioneers ; for the supply
of home-killed meat to the Wholesale Meat Supply Association of
the Area; and for the release of frozen meat from cold store to
the local Meat Importers Committee. Surpluses and deficiencies
in the Area as a whole were reported to the National Meat Dis-
tribution Committee at head-quarters, and in cases of emergency
application would be made by telegram for prompt delivery from
outside the Area. Emergency supplies of live stock would be
delivered to the order of the Wholesale Meat Supply Association,
if they were required for a large town, or to the Live Stock
Auctioneer, if they were intended for a rural district ; supplies
of frozen meat would be sent to local agents of the meat importers.
In general, the duties of the Area Meat Distribution Committees
were, first, to draw up and modify from time to time a regular
programme of distribution, which would normally work without
difficulty ; and secondly, to deal promptly with any emergencies
that were reported owing to the partial failure of the regular
programme. For this purpose it was necessary to keep as large
reserves as possible in the form of frozen meat. Statistics as to

188 MEAT AND FATS

the amount of imported meat in cold storage in the Area were
carefully watched, and as soon as they began to fall below a certain
figure demands would be made on head-quarters to have the
reserves replenished.

Head-quarters

The pivot on which the whole mechanism turned was the
National Meat Distribution Committee in the Ministry of Food
and the executive officials who worked with it. This was a joint
committee consisting of the delegates of the Wholesale Meat
Supply Associations, who formed a National Board for the
wholesale trade, and of four meat importers, two nominated
by the American firms and two by the Australasian importers,
who together constituted the Associated Meat Importers Com-
mittee. The chief duties of the National Meat Distribution
Committee were to review the statistics showing the immediate
and prospective supplies of live stock and frozen meat, to deter-
mine the amount available for supplying the weekly ration per
head of the population ; to draw up periodical programmes for
adjusting supplies and requirements for the Areas as a whole ;
and to deal with emergencies as they arose by setting in motion
the machinery for transferring live stock or frozen meat from
point to point as the occasion demanded. Instructions for the
dispatch of live stock from Area to Area would be given to the
Live Stock Commissioners concerned, and instructions for trans-
ferring supplies of frozen meat would be given to the Associated
Importers Committee. The Associated Meat Importers, though
they were no longer allowed to import and sell meat on their
private account, were permitted to handle the meat purchased
by the Government and to act as agents for its disposal according
to the instructions given to them. In every Area they had their
agents who knew the locality, and had access to the cold stores
in which the reserves were kept. The largest reserves were kept
in London, and emergency supplies were generally obtained by
drawing upon this central source of supply.

Lastly, the control of the whole organization and the re-
sponsibility for decisions as to policy rested with the Meat and
Live Stock Board, which included in addition to the Chairman

MEAT CONTROL IN OPERATION 189

and Deputy Chairman, who were civil servants, the Director of
Meat Supplies and his Deputy, the Chief Live Stock Commissioner,
the Chief Meat Agent, the Supervisor of Slaughtering, and the
Secretary and Accountant of the Central Live Stock Fund.

The Control of Slaughtering and the Dead Weight System

In order not to complicate the account of supply and distribu-
tion, the machinery for regulating purchase and sale on the dead
weight basis has been reserved to the end. It will be remembered
that though the experts generally agreed that purchase by dead
weight was the only fair system of enforcing maximum prices,
the general adoption of so revolutionary a change would have
met with the strongest opposition from the farmers and with
insuperable practical difficulties in execution. In the original
Cattle (Sales) Order, 1917, and in the corresponding Sheep (Sales)
Order, 1918, which required every beast for slaughter to pass
through a live stock market, and established Grading Committees
for the purpose of assessing the grade of each animal according to
the estimated yield of dead meat, exceptions were permitted in
places where sale on the dead weight basis had been customary
in the past or was expressly arranged in agreement with the local
farmers.

The extension of the system, though not its universal adoption,
was undertaken by the Ministry of Food on several grounds. In
the first place, the grading system, though it worked well on the
whole, was never quite satisfactory. Continual complaints were
received, especially in the early stages, that the estimates of the
Grading Committees, which could never be anything more than
intelligent guess-work, tended in most cases to be unduly favour-
able to the farmer. The result was that retail butchers who
obtained their supplies in the live stock markets did not obtain
the average yield of meat, to which the price paid entitled them.
Further, the live stock obtained by the Wholesale Meat Supply
Associations were purchased by them as agents for the Ministry,
and any loss due to over-grading consequently fell on the Central
Live Stock Fund. The loss in both cases was to a certain extent,
but not altogether, compensated by the profit obtained on the
sale of the offals. The second reason was the difficulty found in

190 MEAT AND FATS

providing every butcher with his exact weekly quota of meat,
when live cattle were supplied ; the margin of error each way was
necessarily great, and the difficulty was only partially met by
inducing Butchers Committees to buy and slaughter jointly, and
to cut up the carcasses to suit each member’s exact requirements.
Thirdly, the grading of fourth grade and ‘ casualty ’ cattle, that
is, beasts which were abnormally old or lean or in other ways not
up to the normal standard, was an almost impossible task ; and
special care had to be taken if their meat was sold for human
consumption. Lastly, the grading system could never be applied
successfully to calves, and special measures had to be devised to
prevent their slaughter being stimulated beyond safe limits
owing to the competitive prices offered by the butchers.

All these reasons contributed to the important step whereby
the Ministry gradually assumed control of slaughtering, and
established Government Authorized Slaughter-houses in con-
venient centres throughout the country. The centres used for
Army slaughtering under the Army Cattle Purchase Scheme were
taken over, and where public abattoirs existed, they were made
use of, the official superintendent being temporarily employed as
a Government Agent. In other places the best-equipped premises
available were selected for the purpose. This extension of control
contributed to two incidental reforms, first, the better utilization
of slaughter-house by-products, and secondly, the concentration
of slaughtering in public slaughter-houses, a measure which had
long been desired by Local Authorities and reformers on humani-
tarian and sanitary grounds.

In connexion with the utilization of by-products it is worth
noting that relations were thereby established with other Govern-
ment controls. Loose fat and bones were handed over to the
Tallow Melters and Bone Users Associations controlled by the
Oils and Fats Department of the Ministry of Food. Sheep’s
stomachs were made use of by the Feeding-stuffs Department.
Calves’ vells were carefully preserved and sold at fixed prices to
the manufacturers of rennet, whose output was distributed by
the Butter and Cheese Section of the Ministry for the manufacture
of cheese. Hides and sheepskins were sold to buyers controlled
by the Leather and Wool Departments of the War Office. And

MEAT CONTROL IN OPERATION 191

even the supply of surgical gut received special attention at the
instance of the Departments concerned with medical supplies.
The proper handling of by-products and the prevention of waste,
which centralized slaughtering rendered possible, was one of the
most valuable features of the extension of the dead weight system.

The organization of slaughtering ran on parallel lines to the
main organization. At head-quarters there was a Chief Supervisor
of Slaughtering, responsible to the Director of Meat Supplies, with
a deputy and two assistants. In each Live Stock Area an Area
Supervisor was attached to the staff of the Live Stock Commis-
sioner to look after the operations of Government Authorized
Slaughter-houses. Chairmen and Deputy Chairmen of Auctioneers
were encouraged to make contratts with farmers for the dispatch
of a given number of beasts and sheep direct to these slaughter-
houses for sale on the dead weight basis instead of to the live
stock markets. A Government Slaughter-house Agent was
appointed to run each slaughter-house, to receive and account for
the animals received, and to consign the carcasses either direct to
local butchers or to the nearest Wholesale Meat Supply Association.
He marked and numbered the animals, and kept complete records
in a ‘ Killing Record Book ’, giving the name and address of the
consignor, the dates of arrival, slaughter, weighing, and dispatch,
details as to the weight of each carcass, and the disposal of
the hides, skins, and offals. By this means it was possible to
ensure proper identification of each animal and to guarantee
the accuracy of the weights. Farmers soon began to show
their appreciation of the new system, and one important result
which the Ministry achieved was to encourage the establishment
of Farmers’ Co-operative Slaughter-houses, where the work of
slaughtering could be carried out under the joint supervision
of the farmers and the Government.

Smithfield Control Board

A description of the meat organization would be incomplete
without mention of the special arrangements made to supply
London and the Home Counties. More than a quarter of the
population of Great Britain is dependent for its meat on the great
central meat market at Smithfield. In 1914 the total supplies

192 MEAT AND FATS

of meat which passed through Smithfield in a year was equivalent
to about a million head of cattle and seven million sheep. These
supplies came in a steady stream from all quarters of Great
Britain and from North and South America, South Africa,
Australia, and New Zealand. Smithfield was the meat clearing-
house of the world, and the prices realized there determined the
level of prices in the most distant countries.

The market itself is a huge glass-roof building containing over
three hundred separate stalls or shops. Apart from firms specializ-
ing in the poultry trade, there were 196 firms dealing in meat, of
whom forty-one represented the large importing agencies of the
foreign and colonial freezing works and the remainder were
British firms operating as dealers, jobbers, and salesmen. The
total number of men employed, including journeymen butchers,
porters, scalesmen, &c., amounted to about 10,000. Smithfield
firms had buying agents, clients, and regular business connexions
scattered all over the country. Carcasses slaughtered as far afield
as Aberdeen in the north and Devon in the west were consigned
in special refrigerated meat-vans, hitched on to the express trains
to London, and discharged in the immediate vicinity of the
market. Every hour of the day and night supplies might arrive,
the busiest hours being from 2 a.m. to 5 a.m., when the night
trains were discharging the meat which would be in the butchers’
shops by ten o’clock the same morning.

Competition in normal times ensured that prices were keenly
sensitive to the smallest fluctuations in demand or supply. Under
such conditions a serious shortage or an embarrassing glut could
scarcely arise. It required no forethought or statistical calcula-
tions on the part of any * General Staff’ to ensure that supplies of
meat were always available of the right quality and in the right
quantity.

The introduction of fixed prices, rationing, and control of
supplies played havoc with this intricate piece of machinery. Its
automatic self-regulating mechanism was thrown out of gear, and
at one time threatened to stop altogether. During the early
months of control the wholesale traders of Smithfield found it
impossible to carry on their business without making a loss ;
and only force of habit, financial strength, and a sense of public

MEAT CONTROL IN OPERATION 193

duty kept them at their posts. When the complete system of
control was introduced with the London and Home Counties Meat
Rationing Scheme on February 25, 1918, they ceased to make
losses, but their occupation was gone. A hundred and fifty-five
separate firms were amalgamated into the London and Counties
Wholesale Meat Supply Association, and their stalls were com-
mandeered by the Ministry of Food. Individual trading came
to an end, and the market was transformed into something like
a gigantic Army Depot, to which thousands of butchers came and
drew their daily rations for a population of nearly ten million.

One of the chief difficulties experienced in the rationing of
London, a difficulty which attends all rationing to a greater or
less degree, was to ensure a fair distribution of the many different
qualities of meat available. In normal times the best meat
naturally went to the West End of London, which could afford to
pay the higher price. Under control, though prices varied
according to a schedule for different cuts and joints, it was im-
possible to lay down differential prices varying according to
quality. Variations in the quality of meat are impossible to
define, and for the ordinary customer not easy to distinguish.
Even frozen meat, if it is in good condition and properly ‘ thawed
out ’, is hard to distinguish from home-killed meat.

With rationing and fixed prices such differences had to be
ignored. The Ministry had to adopt the principle that all classes
and all districts should be treated alike as regards quantity,
quality, and price. An absolutely equal division was, of course,
an administrative impossibility ; but the only way to avoid dis-
content was to endeavour to be as fair as possible. This had
a serious consequence for the traders of Smithfield ; for it meant
the breaking down of trade connexions and the end of all specializa-
tion and division of labour between different firms. Firms had
formerly been distinguished for the quality of their meat and the
particular line of trade to which they devoted themselves. Under
the Smithfield Control Board the stalls were divided up according
to the districts they had to supply, the whole market being mapped
out to correspond with the Food Committee Areas of London.

The new procedure involved careful regulation at each step.
The public registered with the retail butcher. The butcher

1569.53 O

194 MEAT AND FATS

informed the Food Control Committee how many customers were
registered with him, and received a ‘buying permit’, which
stated the amount of meat he could buy. These permits were
forwarded to the London Area Meat Agent, who sorted them out
according to Food Committee Areas. The total amount of meat
required for each group of butchers was then notified to the
Smithfield Control Board. The market being divided up into
114 sections, corresponding to the number of Food Committee
Areas in the Metropolitan District, the Control Board had to see
that the stalls in each section received each day the exact amount
to which they were entitled, in their proper proportion of English,
Scotch, Irish, American, Colonial, and other meat. These supplies
were then handed over to an ‘allocator’ for each group, who was
appointed by the London Retail Meat Supply Association, and
whose duty it was to see that each butcher obtained his proper
quota.

Though this sounds simple enough on paper the practical
difficulties involved were immense. Eight million pounds of meat
had to be distributed each week. Sometimes the supplies ordered
would fail to arrive; at other times consignments would arrive
unexpectedly. As any delay meant rapid deterioration, especially
in hot weather, supplies had to be distributed as soon as possible
after arrival, and there would be no time to collect together a large
amount and then sort it out and divide it up carefully and
systematically. The work necessarily proceeded in a rough and
ready manner; the prevailing philosophy was one of good-
humoured acquiescence ; and butchers who got poor meat had to
console themselves with the chance of better luck next time.
Though complaints were common, there was no favouritism.
East End and West End were alike in this, that both stood an
equal chance of getting the best or the worst.

The Smithfield Control Board, which was the authority re-
sponsible to the Ministry of Food for directing these operations,
consisted of ten of the ablest men in the trade, together with
representatives of the Ministry, the retail butchers, and of
Labour. The staff directly employed by the Board numbered
about 1,500, and consisted of amanagers, salesmen, clerks, cutters,
porters, and scalesmen. The heads of private firms whose services

MEAT CONTROL IN OPERATION 195

were required became salaried officials, and the remainder tem-
porarily retired from business. Smithfield thus became a huge
non-profit-making trading concern guaranteed and supervised by
the Food Controller, but operating autonomously like the Port of
London Authority or the Metropolitan Water Board. Given the
conditions that existed, and the assumption that all meat is alike
for purposes of rationing, the new institution worked with sur-
prising smoothness and regularity. Through its instrumentality
queues were abolished, and the success of meat rationing was

assured.

The Central Live Stock Fund

The effect of the Cattle (Sales) Order of December 24, 1917,
was to make the Food Controller, through his agents the live-stock
auctioneers, the sole purchaser of all cattle and sheep for slaughter,
at a flat price per cwt. ‘of meat that they were estimated to produce.
He thereupon resold live stock or dead meat to butchers at
a uniform price, sufficient to leave them a reasonable margin of
profit on resale to the public at the legal maximum prices. Some
of these butchers might be in the same village as the market
where the beasts were sold; others would be in a distant town.
But no matter where they were situated, or what were the actual
costs of delivering the meat into their shops, they paid the same
price and charged the same price to the public.

To make the flat-rate system possible, all the charges for
handling meat from the farm to the butcher’s shop had to be
pooled and spread evenly over the total quantity of meat sold.
For this purpose a national pool, called the Central Live Stock
Fund, was established, into which was paid a fixed levy or ‘ per
head charge’ on every animal bought and sold, and out of which
all intermediate charges were met. ‘The administration of this
Fund was in the hands of a Committee consisting of the Deputy
Chairman of Barclay’s Bank, as Chairman, the Chief Live Stock
Commissioner, an administrative official and one representative
each of the auctioneers, the wholesale and retail trade. The
office of the Fund was manned by accountants and other staff
appointed by the Ministry of Food.

When the Fund started operations in January 1918, the ‘ per

O 2

196 MEAT AND FATS

head charge’ was fixed at 30s,, and out of the proceeds were paid
auctioneers’ commissions, market expenses, and the cost of rail
transport, if any, incurred by farmer and butcher. Later, when
the system of free consignment notes was introduced, the cost of
transport was met by lump sum payments to the Railway Execu-
tive instead of by separate repayments to butchers for every
beast carried by rail. After calculations based on the average of
the first few thousand applications for repayment of freight, the
lump sum payment for the privilege of free carriage was fixed at
£250,000 per annum.

When rationing was introduced, the Central Live Stock Fund
extended its scope. It now became necessary to pool the cost of
imported meat and to sell it at the same level of prices as home-
produced meat. This course was taken partly owing to the ration
being fixed by value and not by weight, and partly owing to the
difficulties likely to arise if meat of practically identical quality
had to be priced at different levels in the same shop. The cost of
imported meats bore no relation to their quality. The cheapest
came from Australia and New Zealand, with which the Govern-
ment had made long term contracts to take the whole output—
a course which saved the Dominion farmers from heavy losses when
refrigerated tonnage had to be taken away from the long-distance
routes. Argentine meat cost more than Colonial, but still left
the Ministry a profit on resale at home prices. But as time went
on, the concentration of shipping in the North Atlantic route
rendered the Ministry more and more dependent on the United
States, where prices showed a constant tendency to rise and soon
reached a level which involved a loss on resale at the fixed prices
in Great Britain. The profits and losses so incurred were paid
into or charged against the Central Live Stock Fund. At first
it was expected that the balance would be on the right side, but
eventually it proved necessary to raise the domestic level of
prices in order to meet an adverse balance. The liabilities of
the Fund were also increased by throwing on to it a number
of items in the cost of distribution which had not hitherto been
covered. In addition to marketing expenses and rail transport,
slaughter-house charges and the expenses and commission of
Wholesale Meat Supply Associations were.also borne on the

MEAT CONTROL IN OPERATION 197

Fund. The average cost per beast for all these expenses was
estimated at 43s. instead of the 30s. originally provided for.

The third factor which affected the solvency of the Fund was
the decision to increase the prices paid to the farmers in the later
months of 1918. It was foreseen that unless special steps were
taken, farmers would tend to flood the markets in the autumn of
1918 and keep back as few animals as possible for slaughter in the
early months of 1919, owing to the heavier expense of feeding
them during the winter months. Normally this tendency is
corrected by seasonal fluctuations in the market price of fat
cattle, higher prices being realized from January to May than
from July to December. In order to ensure as even a flow as
possible, the Ministry thereforé arranged for a gradual increase
of price month by month during the winter, to be followed by
a gradual fall in the summer and autumn of the following year.
Continual changes, however, in the retail prices of meat, especially
increases during the winter when meat is most needed, would have
caused discontent, and would have interfered with the smooth
working of the rationing scheme. It was therefore decided to
average out these seasonal changes in farmers’ prices by charging
the losses and profits incurred to the Central Live Stock Fund.

The Central Live Stock Fund had thus three classes of la-
bility: (i) expenses of distribution from the farmer to the
butcher’s shop ; (ii) losses incurred on the sale of North American
meat at less than cost price ; and (ii) increased prices payable to
the farmer during the winter months.

To meet these liabilities it had three sources of income: (i) the
per head charge, which from March to September had been
reduced to 10s. for cattle and 1s. 6d. for sheep ; (ii) profits realized
on the sale of Colonial and South American meat; (ili) mis-
cellaneous profits from the sale of calves, offal, &c. By September
1918 the adverse balance met by subsidies from the Treasury
amounted to about £2,000,000.

Up till then political considerations had been held to justify
the principle of subsidizing meat prices ; but by the autumn the
success of rationing had been assured, and it was felt that there
were no longer any overwhelming grounds, as in the case of bread,
for continuing to sell at a loss. Retail prices were therefore

198 MEAT AND FATS

advanced on September 22 by an average of 2d. per lb. and
corresponding increases were made in the per head charges. The
increased charges remained in force until March 3, 1919, when
the Fund had once again become solvent and it was possible to
take off the increase of 2d. per lb. which had been imposed.

Live Stock from Ireland

One of the most important sources of supply was Ireland,
and special arrangements had to be made to control the import
of dead meat and cattle for slaughter. Eventually the Food
Controller became the sole purchaser of Irish supplies, and
by this means was able to regulate the amounts coming forward,
and to distribute them among consuming centres according
to a definite programme. Import was only permitted through
authorized ports of entry, of which there were ten in number,
Birkenhead, Fishguard, Bristol, Holyhead, Fleetwood, Heysham,
Silloth, Ayr, Glasgow, and Mode Wheel, Manchester. Each
of these ports was treated as a market and placed under the
direction of a Chairman of the Port Market. The Grading Com-
mittee consisted of an expert valuer appointed by the Ministry of
Food, a representative of the Irish farmers, and a representative
' nominated by the butchers who normally obtained their supplies
from that particular port. The cost of delivery to the ports,
including freight and insurance, was borne by the Live Stock
Fund, and the prices paid were the same as those which the
British farmer received. The bulk of the stock was forwarded
by the Chairman of the Port Market to other live-stock markets
in Great Britain, but supplies which had been consigned for sale
on the dead weight basis might also be sent to a Government
Authorized Slaughter-house. During the autumn of 1918, owing
to the large number of beasts coming forward in British markets,
it became necessary to restrict the number of cattle and sheep
accepted at each port, and from time to time to close certain
ports altogether.

Frozen Meat from Abroad

Before the war about 40 per cent. of the meat consumed in
Great Britain was frozen or chilled meat imported from abroad.

MEAT CONTROL IN OPERATION 199

The greater part went to London and other large towns, while
country districts were fed almost exclusively on home-killed
supplies. Under the rationing scheme frozen meat constituted
an elastic reserve, which could be used to meet emergencies
and smooth out the irregularities which were an inevitable
feature of the home supply. In spite of the expedients adopted
from time to time to ensure an even flow of cattle and sheep
through the markets, the supply constantly fluctuated. Whole-
sale requisitioning when supplies were short, and drastic restriction
of slaughter when supplies were abundant, were alike recognized
to be impossible policies. Such a course would not only have
outraged the farmers’ sense of justice but would seriously have
interfered with the normal sequence of operations on the farm.
The flow therefore remained erratic, dependent on the state of the
weather, the amount of fodder available, and the many other
factors that might guide the farmers’ choice. Apart from such
influence as might be brought to bear by the farmers’ own
Selection Committees, they were left free to decide on what
particular day to send cattle to market. To have attempted any
systematic plan of rationing meat with nothing but home supplies
to draw upon would have been practically impossible; and such
experiments as were made in this country with the freezing of
home-killed meat were not successful. It is not surprising,
therefore, that meat rationing in continental countries was never
a success. It was the existence of a frozen meat reserve that
ensured its smooth working in Great Britain.

At times when stock was coming forward in small quantities,
whole districts would be fed on frozen meat alone. London at
one time was receiving over 95 per cent. of its supplies in the form
of frozen meat. In other parts of the country foreign supplies
were less readily accepted, especially since a large part of the
North American imports were of a distinctly inferior quality. To
avoid complaints of unfair distribution, it was found preferable
to feed whole districts on frozen meat by turns rather than to
divide up home-killed and frozen in the same proportion and send
some of each. The latter system inevitably led to charges of
favouritism against the butchers, who in that case had to decide
which of his customers should receive the inferior quality. Under

200 MEAT AND FATS

the system adopted of supplying to each district frozen meat and
home-killed by alternate fortnights, periods of universal complaint
were followed by periods of general satisfaction.

When meat rationing started, the position with regard to
imported meat gave cause for great anxiety. The whole output
of Australia and New Zealand had been bought by the Board ot
Trade as early as October, 1914, the bulk of it being required for
supplying the British and Allied armies. The Board of Trade
had also bought for the armies 80 per cent. of the output of South
American firms under an agreement which left them free to
dispose of the remaining 20 per cent. as they liked for civilian
consumption. The Ministry of Food, therefore, was only able to
obtain for the civilian population the surplus of Australasian
meat not required by the armies, 20 per cent. of the imports from
South America, and any supplies which it could purchase else-
where. The former was handed over by the Board of Trade at
10d. per lb., and an agreement was made with the South American
firms, whereby they sold their meat to the Food Controller at
104d. per lb. on condition that they should act as agents of the
Ministry for its resale to the trade. Owing to the diversion of
tonnage from the Australasian routes and its centralization in the
Atlantic for the purpose of pouring American troops into France,
the only way to make good the deficit was by large purchases of
North American beef, which was bought by a Buying Mission in
New York at prices fixed monthly by the United States Food
Administration. These prices were high and the quality was often
unsatisfactory ; but the Food Controller’s complaints on both
scores were apt to be met by the rejoinder that he was lucky to
get any supplies at all. The United States railways and ports
were congested ; there was no proper equipment for conducting
a large export trade in frozen meat; and difficulties were ex-
perienced in securing the prompt loading and discharge of meat
cargoes. But though much of the meat was inferior, and some of
it had to be destroyed on arrival, large purchases in the United
States were unavoidable, if the ration was to be maintained even
at the low level of three-quarters of a pound a week.

CHAPTER XVI
OILS AND FATS

Meaning of term ‘ oils and fats — Processes of manufacture — Sources of
raw materials — Normal channels of trade — Margarine industry — Glycerine
requirements — Intervention of Ministry of Munitions — Appointment of
Controller — The ‘Grand Committee’ — Original scheme of control — Opposi-
tion of the trade — Licensing and Maximum Prices Orders, May 1917 —
Statistics and research — Danger of fat shortage, July 1917 — Transfer of control
to Ministry of Food — Preparations for State purchase of oilseeds — Problem
of prices and distribution — Appointment of Advisory Committees — Growth
of combination and corporate feeling.

Amonc the various war-time controls which sprang up in the
spring of 1917 and developed from small beginnings into vast
organizations directing the imports and exports of half the world,
the Control of Oils and Fats occupies a special place. The wide
range of commodities dealt with, the many different sources of
supply in all parts of the world from which they were drawn, the
variety of processes through which they passed, and the large
number of trades dependent on the same basic materials, give it
a kaleidoscopic character which baffles the mquirer. In the
following account the complexities and technicalities of the oils
and fats trades will as far as possible be avoided, and attention
will be concentrated on certain features in the methods of control
adopted, some of which were novel devices specially invented by
the Oils and Fats Department.

The term ‘ oils and fats’ covers vegetable oils obtained from
oleaginous seeds, nuts, and kernels; fish oil and whale oil; and
animal oils and fats obtained from the carcasses of cattle and
sheep. The Oils and Fats Department of the Ministry of Food
had nothing to do with mineral oils of any kind.

Omitting the rarer varieties which were of less importance
during control, we have the following vegetable oils divided into
edible and technical :

Edible oils Technical oils
Palm-kernel oil Palm oil
Ground-nut oil Linseed oil
Cotton-seed oil Rape oil
Coco-nut oil Castor oil
Olive oil

Soya oil

202 MEAT AND FATS

The edible oils are used for the manufacture of margarine and for
making *‘ compound ’ fats for fish frying and for cooking purposes.
Of the technical oils, palm oil is used for soap making, castor oil
for lubricating high-speed engines (during the war the whole
output was taken by the Air Force), and linseed oil for a variety of
purposes, of which the most important are the manufacture of
linoleum, paint, and varnish.

Of the animal oils and fats, oleo and premier jus are used for
margarine making; stearine and tallow for soap and candle
making and for lubricating purposes ; and whale oil, which was
obtained in large quantities during the war, is useful for soap
making and the production of glycerine, a by-product in the
manufacture of soap and an essential ingredient of the propellant,
nitro-glycerine.

Palm oil, olive oil, and coco-nut oil (obtained from copra—
the fatty content of coco-nuts) are imported direct, but the bulk
of the vegetable oils are obtained by extracting or expressing
them from seeds and nuts imported into this country. The two
processes of extraction and expression (the former by means
of a solvent and the latter by hydraulic pressure) are carried on
by oil and cake mills or crushing plants. The residue left after
the crude oil has been removed is a valuable cattle food in the
form of hard cake, or light meal. These oleaginous feeding stuffs
are essential to the farmer for the production of meat, milk,
butter, and cheese. The crude edible oils are passed to refineries
which produce fine edible oils for margarine, common edible oil
for fish frying, &c., and residues for the production of soap and
glycerine. These processes may be represented by the following
diagram :

ImporTED SEEDS aND Nuts
(Through Mar: plant)

| |
Cattle cake. Crude oils.

| |
Edible oils Technical oils.
(through refining plant).
et ee SA

ot | |
Fine edible oils. Common edible Residues, Soap and glycerine, paint, varnish,
oils. waterproofing, linoleum, leather
and textiles, lubricating,

OILS AND FATS 203

The most important sources of supply for oleaginous seeds,
nuts, and oils are West Africa, India, Egypt, Ceylon, the Pacific
Islands, and the Argentine; animal fats come from the meat-
exporting countries, North and South America, Australia and
New Zealand. From West Africa come palm kernels, ground-
nuts, and palm oil; linseed comes from India and the Argentine ;
coco-nut oil from Ceylon and the Pacific Islands; cotton seed
from Egypt and India; rape seed and castor seed from India ;
soya beans from Manchuria ; and olive oil from the Mediterranean.
These are not the only sources—copra and ground-nuts, or, as
they are sometimes called, pea-nuts, are found all over the tropics
—but they were the most important and most accessible places
from which supplies could be obtained during the war.

Practically no vegetable oils are obtained from home-produced
seeds, though attempts were made to encourage the production
of sunflowers for this purpose durmg the war. The amount
yielded, however, was insignificant. Home-produced animal fats,
especially dripping and tallow, are of importance, and necessitated
special measures of control. This dependence of the oils and fats
trades on imported materials in one sense simplified the problem
of control. The number of firms engaged in import and manu-
facture ran into hundreds, but not into thousands ; centralization
was not therefore so formidable a task as in the control of agri-
cultural products. Dependence on imports, on the other hand,
and the variety of raw materials and sources of supply created
special difficulties, which grew in complexity as the supply of
tonnage available decreased.

The import trade falls into three main categories. Oil seeds,
which are obtained principally from India and the Argentine, are
closely linked up with the grain trade, being handled for the most
part by large wheat importers. Animal fats and oils are an off-
shoot of the frozen meat business, and are sold in London and
Liverpool by the large refrigerated meat companies. Nuts and
kernels from West Africa are imported by the West African
merchants, who have their head offices in Liverpool and do
a general trade with the West African Colonies, exporting cotton
goods and miscellaneous stores for the natives, and buying from
them, often by barter, their nuts and oil and other produce. The

204 MEAT AND FATS

principal markets are at the three chief ports of entry, London,
Liverpool, and Hull. The importers sell through brokers, who
act as intermediaries between the importer and the manufacturer.
There are also merchants, who act sometimes as brokers on
commission, sometimes as dealers on their own account.

The war brought about many changes in the oils and fats
trades, but none was more striking than the development of the
margarine industry. In 1913 the weekly consumption of margarine
was about 3,000 tons per week, of which about 1,500 tons were
imported, chiefly from Holland and Denmark. The main raw
materials employed came from British West Africa. Three-
quarters of the West African output went to Germany, from
which Holland obtained crude and refined oil, while less than
one-sixth of the supplies were crushed in the United Kingdom.
During the last year of the war the margarine industry was firmly
established in Great Britain, and the whole of the West African
output was crushed in British mills. By 1918 imports of margarine
from Holland had ceased, and the British margarine industry
was able to supply a weekly consumption of 5,000 tons per week.
The following table shows the change brought about by the war :

Exports oF PALM KERNELS FROM British WEST AFRICA

1911 1912 1913 1914 1915 1916
United Kingdom . 35,411 37,554 35,175 74,797 233,249 241,000
Germany . : 189,131 193,019 181,305
Holland b ° 7,503 14,433 5,984 (figures not available)
France ; : 714 768 1,938

Early History of Control

Early in the war anxiety was felt in regard to supplies of
glycerine. Owing to the preference shown by the military authori-
ties for nitro-glycerine over nitro-cellulose as a propellant, larger
quantities of glycerine were required than had ever been produced
in this country before. The Ministry of Munitions accordingly
prohibited dealings in glycerine, and made a contract with the
soap manufacturers whereby they undertook to increase their
production and to hand over the whole of their output at a fixed
price of £54 per ton. This was the first step in the direction of
State control of the trade. .

OILS AND FATS 205

Soon, however, owing to shipping losses, supplies of raw
material for the soap trade became increasingly difficult to obtain,
prices began to rise steeply, and soap manufacturers began to fall
behind in their deliveries at the same time that military require-
ments were increasing by leaps and bounds. The Ministry of
Munitions thereupon set up an Oils and Fats Branch of the
Explosives Department for the purpose of regulating imports and
exports, rationing raw materials and increasing to the utmost the
output of glycerine. An Oils and Fats Controller was appointed,
and a Grand Committee of traders was set up to act as an advisory
body to the Controller. For the first few months prolonged dis-
cussions took place as to the right methods of control to adopt.
The Grand Committee could comé to no agreement ; the interests
of different sections of the trade were too divergent, and under
any scheme proposed some seemed likely to gain while others
would certainly lose. Amidst the clash of discordant voices the
one proposal that met with general support was that matters
should be allowed to continue as they were.

The Controller’s original scheme was drawn up on drastic
lines. Private trading, in the list of scheduled commodities,
would be prohibited ; the Government would purchase supplies
of raw material in the countries of origin, and would distribute
them to manufacturers through a limited number of Government
brokers. The existing machinery of the trade would only be
made use of to the extent that the Controller saw fit, and he was
to exercise complete discretion as to the firms he might select to
act as his agents.

This scheme aroused strong opposition in all sections of the
trade. The majority of brokers and importing merchants saw
that if it could be carried out they would lose the greater part of
their business, while a few favoured firms would conduct the whole
of the trade as Government agents. Manufacturers objected on
the ground that they would be compelled to take whatever
supplies were offered to them, and because they doubted whether
a few firms could in fact carry on so highly complex and various
a trade. But the chief objection was undoubtedly the feeling,
which no Controller could afford to ignore, that all firms engaged
in the trade should be treated with absolute impartiality. It

206 MEAT AND FATS

drastic measures were necessary, all alike should bear the burden ;
that one man should have the right to pick and choose what
firms to employ and how much trade they should do, was felt to
be an excessive power for any one to wield and met with almost
universal opposition.

In face of this opposition different methods were in fact
adopted. On May 1, 1917, an Order was made requiring all
traders to obtain licences to deal in oil seeds, oils and fats, and
prohibiting dealings except under the conditions laid down in
the licence. This was followed by an Order, on May 9, 1917,
fixing maximum prices for all the principal commodities affected.
The maximum prices were slightly above those at which trading
was at the time taking place, and for a few months owing to the
attention given to the increase of shipping facilities sufficient
supplies were imported to keep prices slightly below this level.
In the meantime the system of licensing dealings gave the Oils
and Fats Department a mass of information about the trade and
enabled it to watch developments and be prepared for more
drastic measures in case the need should arise.

It was at this time that the foundations were laid of the
elaborate statistical system which became later the most striking
feature of Oils and Fats Control. The output and capacity of
crushing plants, refining plants, and margarine factories, the
estimated shipping programme, and the actual shipments month
by month, the oil content of all the various seeds and nuts, and
the percentage yield available for different purposes, the require-
ments of each consuming trade, and the most economical dis-
position of the products at each stage of transformation—these
and a mass of other technical details were plotted out on charts
and diagrams by the most exact and lucid methods of presentation.
The oils and fats trade saw itself reflected as in a mirror. Never
in the history of the trade had so many dark corners been illu-
minated, so many trade secrets been revealed to all; for the
information so set forth was accessible to all comers. Its message
was clear for all to read. Supplies were beginning to dwindle, and
if shipping losses continued at the rate at which they were then
eccurring the future was black.

In July 1917 the supply of glycerine still gave cause for

OILS AND FATS 207

anxiety ; but in addition the position with regard to edible fats
now began to look threatening. Margarine was still being im-
ported from Holland, though every week emphasized the need of
becoming self-supporting and the danger of depending on supplies
from so uncertain a source. Butter was scarce and more margarine
was wanted to replace it. Feeding stuffs were rising rapidly in
price, and imported supplies were becoming more and more
difficult to obtain. Shipping difficulties and uncertainty about
the future were discouraging importers from bringing forward the
normal quantities of seeds and nuts required. These considerations
concerned the Food Controller rather than the Ministry of
Munitions, and it was accordingly decided in July 1917 that the
Oils and Fats Department should”be transferred to the Ministry
of Food. The need for a further extension of control had become
apparent ; above all it was realized that without closer Govern-
ment supervision of import and distribution the existence of
maximum prices combined with tonnage difficulties would seriously
jeopardize the food supply.

The first step taken by the Ministry of Food was to establish
a separate section concerned with Oilseed Supply, and to prepare
the ground for a general scheme of State purchase of imports
which would meet with the approval of the trade. It was soon
realized that methods that would be applicable to one commodity
and to one section of the trade would not apply to all. The
problem was attacked piecemeal, the simplest cases being dis-
posed of first. In August negotiations were set on foot for the
purchase of Egyptian cotton seed. Linseed, rape seed, and castor
seed from India constituted a separate problem, which had to be
settled with the India Office and the Government of India.
Argentine linseed, which is dealt in by the large grain importers,
was a matter for discussion with the Royal Commission on Wheat
Supplies. And West African produce concerned the Colonial
Office and the West African merchants. Several months were
necessary for examining each of these separate problems, and it
was long before the right policy to adopt in each case was finally
settled. A fuller treatment of these problems will be found in
the next chapter.

The next stage in chronological development was the search

208 MEAT AND FATS

for a system of centralized control in the distribution of raw
materials and the regulation of prices at each stage. By September
1917 the full gravity of the shipping position had become apparent.
Not only had the actual imports alarmingly decreased, but the
outlook for the future was even worse. On instructions from the
Cabinet the Food Controller was compelled to cut down his
tonnage demands to the lowest possible level, and even to encroach
upon the reserve stocks in the country. In these circumstances
the strictest regulation had to be imposed on the use to which
imported materials were put. All non-essential uses had to go,
and a carefully balanced programme had to be drawn up based
on the relative urgency and national importance of the rival
claims for supplies.

The principal claimants were the margarine industry and the
soap-making industry. But an endless variety of other mis-
cellaneous trades was also affected. It was no longer possible to
leave the distribution of oils and fats to private initiative. Even
licences and priority certificates were insufficient to secure the
exactitude which force of circumstances now rendered necessary.
Furthermore, as the scarcity began to grow acute, first in one
commodity and then in another, prices in nearly all cases reached
the maximum, and it was seen that without some system of
rationing to take the place of competitive bargaining distribution
would completely break down. The time had come when the
State was compelled to obtain physical possession of all available
supplies, and to allocate them to manufacturers according to
a deliberate plan.

The first step toward this end was the formation of a number
of Advisory Committees, each representing one section of the
trade, in place of the single Grand Committee, which had formerly
existed. The most important of these were the Seed Crushers
and Refiners Advisory Committee, the Oilseed Brokers Advisory
Committee, the West African Merchants Advisory Committee,
the Margarine Manufacturers Advisory Committee, and the Soap
Manufacturers Advisory Committee. Among the advantages of
separate committees were, first, that the members were able to
speak freely in expressing their sectional points of view without
arousing unnecessary controversy ; secondly, that the number of

OILS AND FATS 209

representatives who were able to take an effective part in shaping
policy was greater than before; and thirdly, that each section
of the trade tended through its Committee to develop a corporate
feeling which greatly assisted control and ultimately promoted
a greater sense of unity and interdependence in the trade as
a whole. The plan of having separate Committees was not based
on the precept Davide et ompera. The object which the Ministry
kept constantly to the forefront was to encourage unity and
combination. But the unity was a matter of slow growth, and
followed the lines of organic development rather than logical
synthesis.

1569.53 1p

CHAPTER XVII
NEGOTIATIONS WITH CRUSHERS AND BROKERS

Investigations into costs of crushing and refining — New system of book-
keeping introduced — Provisional ‘ margins’ fixed — Problem of adjusting
maximum prices for seed, oil, and cake — Variations in cost between different
firms — The ‘ marginal’ and the average cost — The principle of a common
pool — Discussion of plans for pooling — Scheme for a Crushers’ Combine
rejected — Profit equalization scheme — Transit pool — New margins agreed,
November 1917 — Adjustment of maximum prices — Requisition of seeds,
nuts, and kernels, and of oils, oileake, and meals — Difference between old and
new prices debited to holders of stock.

Arrangements for distribution — Employment of brokers — Formation of
United Kingdom Oilseeds Brokers Association as sole Government agents —
Allocation of work and remuneration among members — Smooth working of
commercial side of distribution.

THE policy which now had to be worked out was the fixing of
prices at each stage in the process of manufacture. The first step
was to ascertain the cost of production. For this purpose the
Costings Department of the Ministry of Food made exhaustive
inquiries into the figures submitted by crushers, refiners, and
margarine manufacturers, and issued instructions to District
Supervising Accountants to inspect the books of certain selected
firms. Investigations were conducted into the average cost of
crushing palm kernels, ground-nuts, cotton seed, and linseed, and
for this purpose figures were obtained for the last three pre-war
years and for the last two completed financial years. Similar
inquiries were made into the cost of refining. By this means
figures were obtained which gave for a number of firms the
average cost per ton of crushing and other general charges, the
average yield and selling price of the oil, cake, and meal obtained
from each ton of seed, and the net profit per ton of seed crushed.
The conclusions arrived at then formed the basis of detailed dis-
cussion and examination with the Crushers Advisory Committee.

At a series of meetings held in September 1917, the preliminary
results revealed a wide range of differences and a large possible
margin of error owing to the diverse methods of book-keeping

1 See Appendix 13.

NEGOTIATIONS WITH CRUSHERS AND BROKERS 211

employed. The Committee thereupon agreed that the Costings
Department should devise a uniform system of book-keeping, and
instruct each crusher, extractor, and refiner how his books should
be kept for a period of three months from October 1 to Decem-
ber 31, 1917, so that the costs of each should be readily compared.
Each firm would take stock at the close of business on Septem-
ber 30 and again at the close of business on December 31, and
accounts in the required form were to be ready for inspection by
the Costings Department’s District Supervising Accountants not
later than January 31, 1918.

The Committee also agreed to recommend that each firm
should work for a fixed margin to cover the cost of crushing,
extracting, or refining together with a reasonable profit. In the
case of crushing or extracting, the term * margin’ was defined to
mean a stated sum of money per ton of seed which when added
to the net cost of a ton of seed (bags not included) ex ship or free
on rail at the port where the crushing or extracting mill was
situated, would represent the selling price of the resultant oil and
cake. Similarly in the case of refining the * margin’ meant the
amount which, when added to the net cost of a ton of crude oil
ex ship or free on rail at the port where the refinery was situated,
would represent the selling price of one ton of refined oil at the
refinery.

At this point difficulties began to arise. The Committee had
agreed to the general principle that prices should be fixed so as to
leave manufacturers a margin sufficient to cover the actual cost
and allow a reasonable amount of profit. Hitherto maximum
prices had been fixed by Order of the Ministry of Munitions for
seeds and kernels on the one hand and for crude oil and refined
oils on the other. But since the Order had been issued for the
purpose of checking further increases rather than for fixing
reasonable margins (which was impossible before detailed examina-
tion of costs had taken place), the differences between the three
sets of figures yielded an excessive margin both to crushers and
to refiners. If the margins were now to be reduced so as to yield
only a reasonable amount of profit, the maximum prices hitherto
ruling would have to be altered and complicated readjustments
would have to take place. If the price of seeds remained the

P2

212 MEAT AND FATS

same, either the prices of both crude oil and cakes would have to
be reduced ; or if crude oil remained the same, the whole reduction
could be made on cakes; or vice versa, if cakes remained the
same, the whole reduction could come off the price of crude oil.
In any case, whether crude oil was reduced or remained the same,
the level of refined oil prices would have to be adjusted to yield
the agreed margin.

Such wholesale readjustments were to be avoided if possible.
One serious objection was that any alteration would seem to
involve either making a present of unearned profit or paying
compensation for loss to holders of stocks. On the other hand,
it had been clearly demonstrated and was admitted on all sides
that excessive profits were being made in the processes of trans-
formation from the raw materials to the finished articles. It was
the Food Controller’s business to stop profiteering, and he had
publicly promised to reduce prices wherever possible by basing
them on costs of production and a reasonable margin of profit.
For several weeks the Oils and Fats Department and its technical
advisers wrestled with the problem how best this might be
accomplished.

One other complication, which is common to all schemes of
price control, arose in considering the basis on which the agreed
margins should be fixed. Should these be based on the costs of
the most economical unit of production, on the most uneconomical,
or on the average? Inevitably, when maximum prices were
imposed and margins were fixed with reference to actual cost
of production, the tendency was for prices to be based on the
costs of the least economical producer. But if the price fixed
was to be sufficient to give the highest-cost producer a reasonable
profit, the majority working under average conditions would get
more than a reasonable profit, and the most efficient would obtain
an altogether excessive return. True, according to the ‘ marginal
theory’ this is what happens under normal conditions. In a free
market prices are supposed to be determined, on the side of
supply, by the cost of production of the ‘ marginal ’ producer.

Such a solution, however, though it might represent an
advantage to the consumer compared with the absence of all
regulation, was hardly consistent with declarations about the

NEGOTIATIONS WITH CRUSHERS AND BROKERS 213

abolition of profiteering; for it expressly recognized the right of
the majority to take more than a reasonable profit. In the present
case the Advisory Committee admitted, in principle, that the
margins should be calculated to allow a reasonable profit to firms
working under average conditions. Smaller and less efficient mills,
or firms unfavourably situated for transport purposes, were to
have the right of appeal to the Oils and Fats Department, and if
at the end of the experimental period the Costings Department
should find from the new method of book-keeping that, from
causes beyond their control, such firms had incurred a loss, they
were to be entitled to special consideration. If, however, firms
who fell below the average were to receive compensation, it was
only natural for the Ministry to argue that firms who made larger
profits than the average, owing to circumstances for which they
were not reasonably entitled to claim special credit, should be
called upon to hand back part of the surplus.

The discussion thus came to revolve round the vexed question
of a common pool, to which debits and credits would be made
according as individual firms fell below or exceeded the average.
As a special device to meet the exceptional conditions of war
time, the Advisory Committee reluctantly assented to the adoption
of this principle, if the Ministry could arrange a satisfactory
method of carrying it out. If it was to be successful, the procedure
would clearly have to be applied universally. But had the Food
Controller any power to enforce a pooling system by Order ?
If not, was there any prospect of obtaining the voluntary assent
of the whole trade ? These questions were exhaustively explored
and debated during October and November of 1917.

The simplest and most satisfactory scheme, which commended
itself at first to the Ministry, was to get the crushers and refiners
to form a single Association or Combine. The Ministry would then
make a contract with the Association whereby it would undertake
to crush the oilseeds supplied to it, and refine the resultant oils,
for fixed margins, the Association being responsible for the dis-
tribution of the materials among its members, for seeing that they
were handled in the most economical fashion, and arranging some
system of pooling expenses and profit. The fixed margins’ paid
to the Association would be based on the average cost of crushing

214 MEAT AND FATS

and refining ; the Ministry might also grant an additional allow-
ance to cover extra cost of transport in the event of cargoes being
discharged, owing to diversion of steamers, at less convenient
ports. One great advantage of such a scheme would have been
that the trade itself would have had to settle the troublesome
question of deciding to what extent each firm should be employed
in the event of supplies becoming seriously restricted, as they
seemed likely to become in view of the growing scarcity of ton-
nage. The most economical course in such circumstances would
have been to keep the most efficient mills running to their full
capacity and to close some of the less efficient. By this means
costs would be kept much lower than if all the factories were cut
down in the same proportion; and if the Association received
a margin sufficient to cover the cost based on a normal turnover,
the profits to be divided among the individual firms would be so
much the greater. That is to say, it would pay the Association
to close some factories altogether and compensate them for loss
of business out of the pool.

This proposal proved too ambitious and far-reaching to
command general support; and so long as any firm stood out
it was impossible to put it into force. The chief opposition
naturally came from some of the larger firms, who were favourably
situated and had efficient and up-to-date machinery.

Meanwhile, an alternative scheme aiming at similar objects
but more limited in scope, was put forward by a member of the
Advisory Committee who was a Director of one of the largest
crushing firms. This was called the Profit Equalization Scheme.
The object was to enable seeds to be crushed in the particular
mills and ports where it was most economically advantageous,
without giving any individual firm any undue advantage from
the accident of being fortunately situated, and in consequence
receiving a disproportionately large allocation of seed. A profits
pool would be established into which would be paid all the
profits derived from crushing seed beyond an agreed proportion of:
each firm’s capacity, and part of the profits obtained by the
saving in standing charges where such ‘ excess crush ’ was arranged.
Out of it fair compensation would be paid to mills which were
either shut down or compelled to reduce output. The economies

NEGOTIATIONS WITH CRUSHERS AND BROKERS 215

which the scheme would render possible would be: (1) that seed
would be crushed as near as possible to the port of arrival ;
(2) that each class of seed would be handled in the mills best
adapted for the purpose; (3) that the most efficient factories
would so far as possible be run full time while the least efficient
would be closed down; (4) that transport would be reduced to
a minimum; and (5) that the manufactured products would be
distributed over the country in accordance with the most
economical and convenient plan, having regard to the use to which
they would be put. The management of the profits pool and the
allocation of seeds was to be in the hands of the existing Seed
Crushers and Refiners Committee, with a right of appeal to the
Director of Oils and Fats at the Ministry of Food. The finance of
the pool would be guaranteed by the Government, which would
be entitled to take any surplus remaining at the end of control.
Accounts would be settled every six months.

This proposal, unlike the Ministry’s plan for a combination
of the whole trade, met with the approval of the majority, but
again it broke down owing to the refusal of a few of the largest
firms to accept the principle of pooling in any form.

The margins formerly agreed upon, which carried with them
the right of adjustment every three months, and a guarantee of
a supply of seeds equal to 63 per cent. of the pre-war turnover
of each mill, had allowed for an assumed profit of about 5s. per
ton. When the scheme for a pool broke down, new margins were
adopted which increased the assumed profit to 10s. per ton, but
made no provision for an adjustment of accounts or a guarantee of
seed supply. An arrangement was, however, made for a Transit
Pool, under which every crusher contributed 15s. per ton on all seed
received during each month, and received out of the pool each
month his actual expenses on transit of seed from the port to the
mill door. This plan was rendered all the more necessary by the
action of the Admiralty in diverting steamers from the East Coast
to West Coast ports, whereas in normal times large imports are
received at Hull, and many important crushing mills are situated
there.

The margins as finally agreed upon towards the end of
November 1917 were communicated to all crushers on the

216 MEAT AND FATS

29th November. They varied from £2 5s. per ton for linseed to
£3 10s. per ton for palm kernels. It was stated that these margins
would be subject to revision at a later date.

It is now necessary to return to the problem of so adjusting
prices that the crusher would obtain these margins and no more.
Bound up with this problem was the necessity, which every week
rendered more urgent, of obtaining power to direct seeds, oils,
and cakes where they were most required in accordance with
a programme based on a survey of the whole position. These
two objects were accomplished by Orders made by the Food
Controller under the Defence of the Realm Regulations dated the
28th November 1917; the Seeds, Nuts, and Kernels (Requisition)
Order, 1917, and the Oils, Oil Cakes, and Meals (Requisition)
Order, 1917.

Under the first Order the Food Controller took possession of
all seeds, nuts, and kernels mentioned in the Schedule which were
in the United Kingdom on December 1, with the exception of
amounts not exceeding 5 tons. Seeds, nuts, and kernels arriving
in the United Kingdom after that date were to be placed at his
disposal and delivered to him or to his order. Persons concerned
were also required to give full information as to stocks held,
shipments expected, and quantities sold and unsold in each case.

Under the second Order the Food Controller exercised his
power under Regulation 7 to require seed crushers and extractors
to place at his disposal and deliver to him or to his order the
crude oils, oil cakes, meals, and residues produced at their
factories.

These two Orders gave the Oils and Fats Department for the
first time complete control over these commodities in the United
Kingdom, and power to direct their distribution and use as might
be thought advisable. They also indirectly enabled the price
problem to be solved. It will be noticed that the Order re-
quisitioning seeds, nuts, and kernels is of the widest description.
All holders, except those who held not more than 5 tons, were
required to hand over their stocks to the Food Controller. The
raw materials in manufacturers’ hands, as well as merchants’
stocks, were requisitioned. The explanation is to be found in
a circular letter dated November 29, 1917, which was sent to all

NEGOTIATIONS WITH CRUSHERS AND BROKERS 217

crushers, enclosing copies of the Orders, and giving instructions
as to the procedure to be followed.1

The letter explained that under the Order requisitioning their
output the crushers were entitled, in default of agreement, to re-
ceive a price based on the cost of production and a normal pre-war
rate of profit. An agreement had been reached with the Crushers
and Refiners Advisory Committee that they should receive the
margins set out in the schedule. In order to provide this agreed
margin it was necessary to readjust the prices of oilseeds, nuts,
and kernels so as to make them correspond with the maximum
prices of oils, oil cakes, and meals. The Food Controller had
therefore taken possession of all oilseeds, nuts and kernels in the
United Kingdom, including the stocks held by crushers and
extractors as on December 1, 1917, and proposed to release them
to manufacturers on payment of the difference between the
existing maximum prices and the readjusted prices which would
shortly be announced.

In the case of raw materials held by crushers, this meant that
the Food Controller requisitioned them at the existing level of
prices and then handed them back to their previous owners on
payment of the difference between the old and the new level of
fixed prices. By this drastic and novel procedure (for which it
would be difficult to find parallels in other controls) all existing
holders, including manufacturers, were prevented from realizing
any unearned increment from the increase in the level of maximum
prices. It was some time before the Ministry succeeded in ex-
tracting the difference from all the firms in the trade. The
fairness of the step was generally admitted, and eventually even
the recalcitrant firms paid up under protest. The payments
were credited to the Oils and Fats Trading Account—a financial
pool serving for Oils and Fats control a similar purpose to the
Central Live Stock Fund under the meat scheme.

Distribution
The requisition of seeds, nuts, and kernels in merchants’ and
shippers’ hands, and of all supplies imported after December 1

involved the creation of machinery for distribution. ‘This could
1 See Appendix 11.

218 MEAT AND FATS

only be done by employing on agency terms the firms already
engaged in the trade. The exact arrangements to be made had
been discussed in advance with the Oilseed Brokers Advisory
Committee, and by the time the Order was issued the plan of
action was ready to put into immediate operation.

The numbers of brokers acting as intermediaries between
importers and manufacturers, and operating on the principal oil
and seed markets at London, Liverpool, and Hull, was about two
hundred. To appoint each individual firm a Government agent,
to determine how the work should be divided up between them,
and to give detailed instructions day by day as to their opera-
tions was beyond the capacity of a small staff in Whitehall.
It would have involved first, the appointment of whole-time
supervisors in each district (similar to the District Executive
Officers appointed to supervise wool merchants under the British
wool purchase scheme); secondly, careful inquiries as to each
firm’s reliability, financial standing, and usual trade; and
thirdly, endless disputes, appeals, and arbitrary adjudications on
the demarcation of each firm’s business. No one would have been
satisfied, and a great deal of extra work would have fallen on the
Oils and Fats Department.

A solution of this difficulty was found in the creation of an
Association, similar in constitution and objects to the Whole-
sale Meat Supply Associations, which were being formed about
the same time. The name of the new body was the United
Kingdom Oilseed Brokers Association. Every broker, as a con-
dition of his licence to deal in oilseeds, oils, and fats, was required
to join the Association. The Oilseed Brokers Association then
became the sole Government agent authorized to deal in oleagi-
nous produce. Its functions were to handle the documents
relating to stocks of oilseeds requisitioned in merchants’ hands or
on arrival ; to see to the discharge of cargoes ; to inspect the goods
and deal with questions of quality; to arrange the necessary
allowances in accordance with the usual trade customs; and to
make payments to the holders and collect the proceeds of sale
from the firms to whom the goods were allotted. The usual trade
terms were for payment within fourteen days. The Association,
or rather its members, arranged to finance transactions on behalf

NEGOTIATIONS WITH CRUSHERS AND BROKERS 219

of the Government and render an account of purchases and
sales at regular periods. As remuneration the Association re-
ceived a half per cent. on the value of all goods passing through
its hands. The Association accepted liability for the integrity
of its members, and was required to put up a guarantee fund
of a quarter of a million pounds invested in Treasury bills and
deposited to the order of the Food Controller.

It is interesting to note how the Association settled the problem
of allocating work. After ascertaining the views of its members,
the governing body decided to give up.all idea of regimentation
and strict division of labour. Each member firm was allowed to
compete as before for the patronage of its clients, the manu-
facturers. Which actual firm should be employed for handling
any particular lot of goods was decided not by the Government or
by the Association, but by the manufacturer to whom the goods
were allotted. Each member was thus able to maintain his usual
trade connexion, so far as his clientéle was willing. On the other
hand, he gained no immediate advantage from increasing the
number of his customers ; for the brokerage on every transaction
went not to the member firm but to the Association. Each
member’s share of the Association’s receipts was fixed at an
agreed proportion based on figures of pre-war turnover, and bore
no reference to the amount of business actually conducted under
control. Some brokers found this sufficient reason for doing as
little as possible, since they were sure of a comfortable income in
any case; but others, more far-sighted, took on as much as they
could possibly undertake, with a view to building up goodwill and
useful connexions for the period after control was ended.

The formation of this Association, which met with general
approval and support (given the necessity for Government control
at all), and the smooth and efficient manner in which its leading
officials conducted its business, solved some of the most difficult
administrative problems which the Oils and Fats Department had
to face. The commercial side of Oils and Fats distribution hence-
forth ran with surprisingly little difficulty. Attention must now
be turned to the purchase of supplies from abroad and the °
development of Inter-Allied co-operation in buying.

CHAPTER XVIII

OILSEEDS SUPPLY AND THE INTER-ALLIED OILSEEDS
EXECUTIVE

Inter-departmental conferences on oilseeds supply, August 1917 — Proposal
to centralize purchases and shipping arrangements — Negotiations with French
Minister of Commerce — French demand for pooling resources — Finance and
shipping dealt with separately — Terms of agreement constituting Inter-Allied
Oilseeds Executive — Not a joint trading corporation.

Machinery of purchase — Purchases made f.o.b. not c.i.— Reasons for
this — Methods of purchase varied — Co-operation of Governments in British
Dominions and Possessions — Egyptian cotton seed — Terms of purchase —
Appointment of Cotton Seed Control Board at Alexandria — Coco-nut oil from
Ceylon — Linseed, rape seed, and castor seed from India — Argentine linseed —
Animal fats from South America, Australia, and New Zealand — Purchases in
U.S.A. — Whale oil — Olive oil — West African oleaginous products obtained
by purchase c.i.f.— Ministry of Food’s monopoly of import — Tonnage Pro-
gramme 1917-18 and 1918-19.

Tue considerations that led to the gradual extension of State
purchase of imported oilseeds, oils, and fats were, on the one hand,
a desire to keep prices as low as possible, and on the other hand
the necessity of arranging an exact programme of imports with
the Ministry of Shipping. In August 1917 conferences were held
between representatives of the Ministry of Food, Ministry of
Shipping, Foreign Office, Board of Trade, India Office, and Colonial
Office to consider the advisability of extending to oilseeds the
same procedure as that which had been applied to the purchase
of cereals. The chief features of the control of cereals by the
Royal Commission on Wheat Supplies were, first, monopoly of
import on Government account ; second, purchase in the country
of origin or port of shipment; third, co-operation between the
Allies to avoid competitive buying ; and fourth, a joint shipping
programme and centralized arrangements for chartering, load-
ing, and movement of tonnage. By this means supplies were
obtained according to a definite programme of requirements,
prices were kept as low as possible, and the most economical use
was made of the gradually decreasing volume of tonnage.

In principle it was agreed that there would be similar advan-

OILSEEDS SUPPLY 221

tages if the same system was applied to oilseeds, oils, and fats.
One attempt had already been made under the auspices of the
Ministry of Munitions to centralize imports; but the difficulties
had been under-estimated. There were many different interests
that had to be reconciled to a course that was bound to deprive
them of their freedom and a large measure of profit. The import
of oilseeds, oils, and fats was not one trade but many. The number
of different commodities involved was greater than those handled
by the Wheat Commission, and the sources of supply were
scattered all over the world. India, the Dominions, the Crown
Colonies, and Egypt were all interested in selling their produce
on the most favourable terms, and before arrangements for taking
the trade out of private hands were put into force the India Office
and the Colonial Office would have to consult the Dominions and
Colonies and obtain their consent. The administrative difficulties
of drawing up and executing a programme of purchase and ship-
ment of so wide a variety of articles in so many different countries,
according to a definite time-table to suit the requirements of the
Ministry of Shipping, were likely to prove extremely onerous.
Lastly, to attempt to centralize purchases and shipping arrange-
ments, not only for the United Kingdom, but for France and
Italy as well, seemed likely to multiply these difficulties to such
an extent as to render the plan unworkable. It was agreed,
however, that this was the right line of development to pursue,
that the shipping situation was rapidly making it imperative,
and that, though progress would necessarily be slow, a beginning
should be made at once.

The Allies by this time needed no pressure to induce them to
pursue a policy of co-operation, but were themselves anxious to
press forward in this direction with all possible speed. Important
negotiations took place with the French Minister of Commerce
during his visit to London in August 1917.

The economic situation of France was at that time very
serious. The delegates of the French Government urged that
only a complete pooling of resources among the Allies would
enable them to put forth their full strength, and that unitary
command was necessary not only at the front but in the sphere
of commerce, shipping, and finance. This meant that Great

222 MEAT AND FATS

Britain was asked to render much greater assistance to France
than she had in the past. Hitherto assistance had been given
without stint, so far as essential military requirements were
concerned; but the needs of the civilian population and the
maintenance of French industries were not regarded as falling
within the same category. It was true that French trade and
industry had suffered much more from the war conditions apart
altogether from the crippling effects of the invasion in the North
of France. This was largely due to the insufficiency of the French
mercantile marine to meet the needs of French industry. Great
Britain, however, was already feeling the pinch more and more
every month, and any further assistance to France could only be
given at the cost of still heavier sacrifices. The British Govern-
ment was not therefore in a position to agree to the whole of the
French demand ; but the need for maintaining Allied unity and
the risk of serious collapse rendered very considerable concessions
inevitable. One incidental advantage of great importance
fancially to Great Britain was that closer co-operation rendered
it possible to insist on joint buying, and thereby to stop the
forcing up of prices through the Allies competing against one
another.

After protracted discussions this policy bore fruit in further
concessions in regard to finance and shipping, and in the formation
of two. Inter-Allied bodies modelled on the already existing
Inter-Alliied Wheat Executive. These bodies were the Oilseeds
Executive and the Meat and Fats Executive.

The Memorandum of Agreement which defines the constitution
and functions of the Oilseeds Executive is given in Appendix 12.
The Executive was set up ‘for the purpose of controlling the
purchase and supply of oleaginous nuts, seeds, and kernels, and of
vegetable oils and fats, of co-ordinating control of selling prices
in the United Kingdom and France, of allocating them in agreed
proportions between the two countries, and of selling them to
third parties Allied and neutral’. The other clauses may be
summarized as follows :

The Executive was to consist of an equal number of repre-
sentatives of each country, and, subject to the authority of the
respective Governments, was to have full power to act on their

OILSEEDS SUPPLY 223

behalf. A programme of requirements was to be drawn up, and
the proportion of the total supplies that each Ally was entitled
to receive was called that Ally’s * ascertained proportion ’. These
ascertained proportions were to be the basis on which supplies
were to be allocated, but they might be varied from time to time
by mutual consent, having regard to the stocks held in each
country, the relative urgency of their needs, and the amount of
tonnage at their disposal. Where purchases were made jointly,
the cost in the country of origin would be averaged, and each
Ally would pay for its share on the basis of the average cost. The
principle of sharing profits and losses on the basis of prices f.o.b.
in the port of shipment was accepted, subject to satisfactory
financial arrangements being concluded between the financial
authorities of the two countries. (The French proposal that the
cost of insurance and freight should also be pooled was rejected.)
The Oilseeds Executive was to have no voice in the allocation of
tonnage and finance, which remained matters for the respective
Ministries of Shipping and Finance. Subject to any general
agreement as to shipping and finance (no general pooling agree-
ment was ever concluded in these vital services), payment for and
shipment of the supplies obtained for each Ally were to be under-
taken by that Ally. This requirement was rendered more precise
by a clause which provided that where, by arrangement with the
Oilseeds Executive, the British Government made purchases on
behalf of France, the necessary funds must be supplied by the
French Government before the purchase was made; in the case
of purchases in Canada and the United States, the French Govern-
ment had to put up the dollars.

The agreement in its final form left the Executive rather
a consultative than an executive body. It deliberated and made
decisions, but it did not carry them out, still less did it have any
authority to enforce decisions. It did not, in fact, make purchases
or contracts in its own name, for though proposals were made
from time to time that the Executives should be run as financial
partnerships or Governmental joint-stock companies, they never
had any joint funds at their disposal. The financial provisions,
whereby each Ally paid for its supplies as soon as they were
purchased, meant that the actual purchaser was in all cases one

224 MEAT AND FATS

or other of the Governments and not the Executive as a corporate
body in itself. The great importance of the agreement was that
it established the principle of co-operative buying, according to
a common plan drawn up and agreed upon by both parties, and
provided the necessary machinery for securing the continuous
and intimate discussion without which this principle could not
have been carried out. It is doubtful whether the more ambitious
scheme for an Inter-Governmental Trading Corporation would
have had any greater advantages. But in any case it could never
have been carried out without admitting the principle of financial
partnership, which the respective Treasuries were not prepared to
adopt.

Machinery for purchase of otlseeds, oils, and fats

In normal times the usual procedure for obtaining oilseeds,
oils, and fats from abroad is for the large importers or shippers
to buy them at local markets in the country of origin and sell
them c.1.f. (that is at a price including cost, insurance, and freight)
at one of the produce markets in the United Kingdom. During
the war the Government rarely bought c.i.f. Wherever possible
it either purchased through agents in the interior of the country
of origin, or more commonly f.o.b. (that is at a price covering all
expenses up to the point of delivery ‘free on board’ ship). The
reasons for this were connected with the shortage of shipping and
the difficulties of finding foreign exchange. In 1917 the tonnage
scarcity had become so pronounced that the Ministry of Shipping
was compelled to requisition practically the whole of the British
mercantile marine, and to control in the minutest fashion the
uses for which tonnage was provided and the commodities which
could be transported. Throughout the war the Government paid
for requisitioned tonnage on the basis of Blue Book rates, that is,
the rates originally agreed upon between the Admiralty and
shipowners and embodied in the famous Blue Book. The private
shipper found it increasingly difficult to obtain shipping space,
and then only at extremely high rates of freight. If essential raw
materials like oilseeds were to be imported in sufficient quantities,
special facilities had to be obtained from the Ministry of Shipping.
A regular import programme had to be drawn up, the date and

OILSEEDS SUPPLY 225

port of shipment for each cargo had to be arranged weeks before-
hand, and purchases had to be made at the right time to fit in
with the arrival of the ship allotted. Except in certain special
trades, this co-ordination was only possible if there was one buyer
in the country of origin. The exact method employed could vary
according to circumstances ; but the essential condition was that
the Ministry of Shipping should be able to find out precisely what
cargoes had to be lifted and count on them being ready according
to programme.

From the financial standpoint Government purchase became
no less important owing to the increasing difficulties of the foreign
exchange situation. In the United States, Canada, Argentine, and
India sterling was heavily depretiated partly owing to the excess
of imports over exports to those countries. Every unnecessary
purchase added to the adverse trade balance, increased Great
Britain’s indebtedness, and absorbed part of the ever-diminishing
resources required for financing the import of essential commo-
dities. Purchases on a c.i.f. basis from private importers tended
to depreciate the exchange, and rendered it more difficult to carry
out the Treasury policy of * pegging the exchange ’ and rationing
the use of foreign credits. Co-ordination of purchases, both as to
time and place, with the Treasury’s financial programme necessi-
tated buying on a f.o.b. basis. Purchases could then be made only
after the Treasury’s approval had been obtained, and the necessary
foreign funds had been secured and earmarked for the purpose.

The methods followed in each case were determined by the
degree to which it was possible to influence the policy of
the Government in the country of origin. In the British
Dominions and Possessions the first step in the direction of
control was prohibition of export except to the United Kingdom
and to the Allies. In the case of oilseeds this step had been taken
early in the war as a means of preventing supplies reaching the
enemy through neutral countries. Later on it became a valuable
means to enable the British Government to obtain supplies at
a reasonable price. In Australia and New Zealand the Dominion
Governments generally acted as the purchasing agent of the
Imperial Government. In British possessions and protectorates

prohibition of export enabled the whole exportable surplus to be
1569.53 Q

226 MEAT AND FATS

purchased at fixed prices. Outside the British Empire supplies
had to be obtained in the local markets, often in competition with
neutral buyers. In the United States supplies could only be
obtained with the approval of the United States Food Adminis-
tration and at prices agreed by them.

Egyptian cotton seed was the first oilseed to be purchased by
the Ministry of Food. In August 1917 telegraphic negotiations
teok place through the Foreign Office with the Egyptian Govern-
ment. Export was prohibited by Khedival Decree, and the
British Government undertook to purchase all the cotton seed
delivered at Alexandria during the coming year at a fixed price
of £9 per ton f.o.b. The Egyptian Government appointed a
Cotton Seed Control Board, consisting of influential men familiar
with the trade, to act as the agents of the British Government,
and to make all arrangements for inspection, payment, ware-
housing, and shipment. The financing of purchases was arranged
through the National Bank of Egypt. On receipt of a guarantee
from the British Treasury the Bank advanced the funds necessary
for payment in Alexandria, and was repaid in sterling with 5 per
cent. interest in respect of each consignment of seed after it had
arrived in the United Kingdom and had been sold to a crusher.
The amounts due were collected from the crushers and paid into
the National Bank of Egypt by the United Kingdom Oilseed
Brokers Association acting as agents for the Ministry of Food.
The work of the Ministry of Food was thus reduced to the
minimum. The Ministry of Shipping agreed to allocate 15,000
tons of shipping space per month to carry seed from Alexandria,
this amount to have first-class priority. Instructions were given
to the Shipping Conference of the Malta and Alexandria Steamship
Companies to carry out this monthly programme, the allocation
of space in each individual steamer being left to the discretion of
the steamship companies concerned. One of the first tasks of the
Ministry was to order half a million jute bags from India through
the War Office Jute Goods Depot for the use of the Cotton Seed
Control Board in shipping the seed.

Purchases of coco-nut oil were made in the Straits Settlements
and in Ceylon by the Governor, acting as agent of the British
Government. The oil was bought from the local crushing mills

OILSEEDS SUPPLY 220

at prices ruling in local markets. The Oilseeds Branch had to
take special steps to see that second-hand casks and containers
were returned to the colonies, since war conditions had interfered
with the supply of new casks.

Linseed, rape seed, and castor seed were bought in India
through the principal firms normally engaged in the trade. The
Ministry authorized them to buy from time to time up to a certain
quantity within certain limits of price. The agent firms bought
_ from native dealers at prices ruling in the interior and resold to
the Ministry of Food at prices including delivery f.o.b. In Egypt
the exportable surplus of cotton seed constituted far the greater
part of the production. The fixing of a guaranteed price f.o.b.
therefore determined the level of prices. In India the amount of
oilseeds shipped abroad was so small a proportion of the total
crops that this was impossible; but the level of prices in the
interior could be regulated to some extent by judicious buying
and by keeping off the market when prices rose and increasing
purchases when they fell. But the buying programme was
always dominated by the necessities imposed by the shipping
programme. Ships were liable to arrive unexpectedly. If no
cargo was available at the right time, the opportunity for ship-
ment was lost; the steamer would take another cargo or go off
half full to fetch one elsewhere.

Linseed from the Argentine was bought f.o.b. through the
Wheat Commission’s agents. These were the large grain im-
porters with head offices in London and branches in the Argentine,
who were in the habit of shipping linseed in normal times. Their
operations were supervised by the Wheat Commission’s resident
Commissioner in South America, who received buying instructions
from the Ministry of Food in London. Purchases were financed
by the Treasury out of special credits raised in the Argentine.
There was no prohibition of export, with the result that com-
petition from the United States and neutral countries forced
prices up considerably above the level ruling in India. So far as
possible the Ministry tried to avoid buying in the Argentine, but
it was impossible to obtain all that was required in India; and
from the shipping point of view it was preferable to buy in the
Argentine because the distance was shorter.

Q2

228 MEAT AND FATS

The animal fats, premier jus and tallow, were also bought
f.o.b. at market prices ruling from time to time in the Argentine
from the British importers normally engaged in the trade. Tallow
from Australia or New Zealand was either purchased on behalf of
the Ministry by the Dominion or State Government concerned
or it was granted shipping space by the Ministry and requisitioned
on arrival from the usual shippers.

Purchases in the United States were confined to cotton oil,
oleo, and stearine. These were bought f.o.b. New York by the
Ministry of Food’s Buying Mission in New York at market prices
approved by the United States Food Administration. Purchases
were reduced to the minimum owing to the very high level which
prices had reached in the United States market. Again, however,
there was the conflict between financial and transport con-
siderations. New York was the most economical source of supply
from the point of view of shipping.

Whale oil, which was bought in large quantities to supply the
soap and glycerine industry, was obtained on favourable terms
from the Falkland Islands. The whaling industry is conducted
by Norwegian firms in the territorial waters adjoining the Falkland
Islands and other British possessions in the South Atlantic. The
whole supply of whale oil produced by these firms was purchased
at fixed prices f.o.b. Olive oil was bought at local prices through
the British Consul in Tunis.

The only important supplies obtained on a c.if. basis were
palm kernels, palm oil, and ground-nuts from West Africa. No
difficulties of exchange existed, since West African merchants acted
both as importers and exporters and thus themselves regulated
the balance of trade. To a large extent the native produce was
obtained by barter and not by cash payments. Export of olea-
ginous products was prohibited from British West African
Colonies except to the United Kingdom and certain Allied coun-
tries. Maximum prices were fixed under the Seeds, Nuts, and
Kernels (Requisition) Order for palm kernels and ground-nuts,
and under the Oils and Fats (Requisition) Order for palm oil.
Tonnage was provided according to a programme drawn up in
agreement with the Ministry of Shipping, the details of shipment
being left to the West African merchants and the steamship

OILSEEDS SUPPLY 229

companies to settle between them. The requisition prices allowed
for a fixed rate of freight and a moderate profit to the importer.

By August 1918, with the exception of West African products,
which were taken over at fixed prices on arrival, no oilseeds, oils,
or fats were being imported on private account. No legal pro-
hibition of import was imposed, but since all the tonnage available
was allocated only to the Ministry of Food, private importers
could get no shipping space. With the exception of cotton oil,
oleo, and stearine, which were obtained in the United States, the
supplies were purchased at prices which were distinctly favourable
to Great Britain. This was due partly to concentration of pur-
chase in the hands of a single buyer, partly to the scarcity of
tonnage which left local supplies in the country of origin relatively
abundant, but also in a large degree to the fact that the various
parts of the Empire from which the bulk of supplies were drawn
regarded the preferential treatment of British and Allied require-
ments as part of their war contribution.

The tonnage programme
The following were the quantities of tonnage estimated to
provide the minimum essential requirements of margarine, edible
oils and fats, glycerine, and technical oils during the years 1917-18
and 1918-19:

1917-18 1918-19
tons tons

Palm kernels . ; ‘ 3 290,000 290,000
Ground-nuts . 4 ; ; 134,000 134,000
Castor seed . : ‘ ‘ 66,000 66,000
Cotton seed . : : 2 300,000 300,000
Linseed . : ; é ; 314,000 314,500
Rape seed . : A $ 36,000 36,000
Palm oil : : : ‘ 120,000 120,000
Cotton oil ; , A A 18,000 30,000
Coco-nut oil . f ; A 49,000 48,000
Oleo ; : ; : ‘ 23,000 45,000
Olive oil ; ‘ é : 18,000 5,000
Premier jus. : : : 14,000 77,000
Stearine. a 10,000
Tallow . ; ‘ Sek; = 40,000
Whale oil : : 2 : 6,000 40,000
Castor oil ; 5 F : — 6,000

Totni ee SANT ae ne 1,388,000 1,561,500

CHAPTER XIX
MARGARINE AND EDIBLE FATS

Prejudice against margarine — Its composition — Figures of consumption,
1913-16 — Weekly supplies of butter and margarine combined during 1917 —
Reduction of imports from Holland — Increase of home production — Maximum
Prices Order, November 1917 — Uneven distribution — Alarming increase of
queues in December — Local rationing and requisitioning — Preparations for
complete control — Fewer trade connexions to be broken — The Margarine
Clearing House — Functions of local officials — New machinery of distribution
working smoothly, June 1918.

Control of quality — Expert inspection and guidance — Weekly samples
submitted — Results of examination published — Comparison of marks gained
— Improvement in refined oils — Other edible fats and oils — Advantages of
standard specifications.

_ Control of dripping and tallow — The problem of relative prices — Tallow
Melters Association formed — Standardization — Sampling and_ testing —
Results of organized competition in quality.

Ow1ne to the decline in butter imports during 1917 and 1918,
margarine assumed a far greater importance than before the war.
From being regarded as something cheap and nasty, it became
in the days of rationing the staple fat diet of the urban population.
This change in custom was fortunately accompanied by improve-
ment in quality. Many whose choice was limited to Government
imported butter, which had lost its freshness, and home manu-
factured margarine straight from the factory, learnt to prefer the
latter. The prejudice against it largely disappeared when it
became expensive and scarce.

The approximate composition of vegetable margarine is as
follows :

Per cent.
Hard oils (palm-kernel oil or coco-nut oil) : . : 64
Soft oils (cotton-seed oil or ground-nut oil) 5 5 : 19
Salt . * ‘ é S : 3 ° 5 . 4
Water . 5 3 : 3 5 : ‘ 13
100

The proportion of water is fixed by law at not more than 16 per
cent. The proportion of hard oils varies with the season
from three-fourths to four-fifths, being greater in hot weather.

MARGARINE AND EDIBLE FATS 231

Oleo-margarine contains animal fats to a greater or less degree in
place of hard oils. About 15 per cent. of animal fats, mainly
premier jus, oleo and neutral lard, is the minimum so used.
Premier jus is the name given to fresh fat obtained from the
heart, caul, and kidneys of cattle and sheep. Oleo and oleo oil
is a softer fat obtained by hydraulic pressure from premier jus,
the residue being stearine.

The average weekly consumption of margarine in the United
Kingdom during the four years 1913, 1914, 1915, and 1916 was as

follows :
Home

manufactured Imported Total

tons tons tons

1913 1,630 - 1,420 3,050
1914 1,730 1,440 3,170
1915 2,230 1,940 4,170
1916 2,480 2,630 5,110

For the six months from January to June 1917 the average rate
of consumption was about 5,410 tons per week, of which 3,260
were home manufactured and only 2,150 were imported. The
following table shows the average weekly supplies of butter and
margarine together, which were available from July to December
1917, compared with the first six months of the year :

AVERAGE WEEKLY SUPPLIES

Margarine Butter

1917 oe os = Total

Home Imported Imported

manufactured P P

tons tons tons tons
January to June 2 3,260 2,150 2,770 8,180
July : A 3 3,500 2,180 1,240 6,920
August . d i 3,830 2,550 900 7,280
September F a 3,380 690 1,150 5,220
October . 4 : 4,050 1,000 700 5,750
November 5 : 4,300 1,300 450 6,050
December ; ; 4,350 870 250 5,470

It will be seen that butter imports from July onwards were less
than half the average for the first six months; in August the
imports fell to one-third. Margarine supplies on the other hand

939 MEAT AND FATS

increased till September. In that month an interruption occurred
in the cross-Channel services to and from Holland, with the result '
that Holland got scarcely any raw material and Great Britain
less than a third of her previous imports of margarine. The fall
in home manufactured supplies during the same month was due
to a series of air-raids over London which interfered with work
at one or two factories.

No figures can be given of home-produced supplies of butter,
but a rough estimate would put them at about 2,000 tons per
week in normal times. In 1917 the output had fallen between
10 and 20 per cent. If, therefore, we add an estimated 1,700 tons
for home-produced butter, the available supplies of butter and
margarine combined in September 1917 were at the rate of about
7,000 tons a week compared with 9,000 tons a week before the
war. From this figure had to be deducted 1,000 tons per week for
the needs of the Army, leaving only 6,000 tons weekly for the
civilian population. |

An increase in the home production of margarine depended ©
on four factors, raw materials, crushing plant, refining plant, and
margarine-making plant. The crushing plant was ample, and
provided that the tonnage programme was maintained, the supply
of raw materials was likely to be sufficient. Early in 1917 special
facilities had been granted by the Ministry of Munitions for the
erection of additional plant for oil refining and margarine manu-
facture. The refining capacity, which during the first six months
of 1917 was between 3,000 and 4,000 tons weekly, was expected
to reach between 5,000 and 6,000 tons by the end of the year.
The additional margarine plant which was being installed was
expected to bring the total maximum output up to 6,000 tons per
week at the end of 1917 and 7,000 tons by June 1918. This
increase was mainly due to the large factories which were being
erected by Lever Bros., and by the Dutch firms Jurgens Ltd. and
Van den Berghs Ltd., each with a capacity of about 500 tons per
week, The number of firms making margarine in the middle of
1917 was twenty. Nearly one-half of the total output during the
first six months was produced by the Maypole Company, and
during the same period fourteen firms produced less than 100 tons
weekly.

MARGARINE AND EDIBLE FATS 239

If butter imports could be maintained at 1,500 tons per week,
and the home production of butter remained constant at about
1,500 tons per week, the total supplies of butter and margarine
were expected to reach 10,000 tons per week, without any imports
of margarine from Holland. Lord Rhondda was therefore able to
announce in the House of Lords on 20th November 1917 that by
June 1918 the home production of margarine was expected to be
four times the pre-war figure, and that the total of butter and
margarine combined would be equal to the normal figure, but with
their relative proportions reversed.

On 20th November 1917, after examination of costings and
negotiations with margarine manufacturers, maximum prices
were fixed under the Margarine (Maximum) Prices Order, 1917.
Two qualities of margarine were recognized, vegetable margarine
and oleo-margarine. The price to the manufacturer for the former
was fixed at 10d. per lb. and the retail price at 1s. per lb. Oleo-
margarine was defined as margarine containing not less than
55 per cent. in weight of the following fats: oleo, oleo-stearine,
premier jus, and choice and extra choice neutral lard, and no
hardened oils.

The fixing of prices prevented the public from being exploited
owing to the temporary shortage, but, as always happened where
supply was unequal to the demand at the fixed price, distribution
became uneven, and the scarcity became most pronounced at
places farthest removed from the source of supply. The shortage
from September to December varied between 15 per cent. to
20 per cent. compared with pre-war consumption. With fixed
prices and no control of distribution, a shortage of 20 per cent. is
not likely to be spread evenly; the tendency is rather for 80 per
cent. of the shops to get their usual supplies and 20 per cent. to
get none. This tendency was the more pronounced in the present
instance, since retailers who were in the habit of getting margarine
from British factories, found no diminution in their usual supplies,
whereas shops that usually sold imported butter or Dutch mar-
garine found their source of supply suddenly reduced by more
than a half. The Maypole Company, which owned the largest
margarine factory, was able to deliver an even larger supply than
usual to its own multiple shops. It is not surprising,. therefore,

234 MEAT AND FATS

that the margarine queues, which rapidly grew in number and
length during the last few weeks of the year, were longest and most
clamorous at the doors of the Maypole Company’s shops.

By December imports of butter had dwindled to 7 per cent. of
the normal, and margarine imports were less than a third of the
1916 average. Retailers dependent on imported supplies found
it practically impossible to obtain the home-produced article.
The ‘ queue ’ evil reached alarming dimensions ; munition workers
threatened to cease work in order to stand in the queues in place
of their wives and children. Immediate action had to be taken
to correct the sudden failure in supply and the breakdown in
distribution. The first step was the inauguration of local rationing
schemes, and the second was an Order empowering local Food
Control Committees to requisition supplies of margarine and
redistribute them among retailers in their area.

The machinery of rationing which had long been debated and
postponed, had now to be improvised in a few days. Local
rationing schemes were introduced early in December in Birming-
ham, Chesterfield, and other industrial districts, and on 14th
December Lord Rhondda urged that similar measures should be
taken elsewhere. On 22nd December an Order was issued
authorizing Food Control Committees to enforce local rationing
schemes, and a model scheme was drawn up by the Ministry and
forwarded to them for their guidance. The articles recommended
for rationing were butter, margarine, and tea, the maximum
ration allowed for butter and margarine together being only 4 oz.
The scheme provided for registration of customers with the
retailers of their choice.

The Food Control Committee (Margarine Requisition) Order,
dated the 20th December, gave Committees legal powers to
requisition stocks and require delivery to their order, the price
to be paid being the wholesale maximum price of 10d. per Ib. and
an additional sum not exceeding $d. per lb. to cover the expenses
of the retailer from whom they were requisitioned. Where these
powers were exercised, distribution was at once improved and
queues diminished. On the day following the issue of the Order,
the Mayor of Colchester commandeered nearly a ton of margarine
and another ton three days later. The supplies were then divided

MARGARINE AND EDIBLE FATS 235

up among the retailers who had none, with the result that the
crowds and long queues, which had been giving much trouble to
the police, were dispersed. Raids of this kind were generally
directed for reasons explained above upon the Maypole Company’s
shops. Supplies which the Maypole Company were selling at
11d. per lb. had to be taken from them and sold at 1s. per Ib. in
other shops.

These local measures were at the best a temporary palliative.
To secure even distribution between area and area action on
a national scale was necessary. Preparations were therefore made
for putting into force complete control of distribution from the
factory to the shop. The first step was taken on 21st December
by the Margarine (Registration of Dealers) Order, under which
wholesale dealers were required to obtain licences from the Food
Controller, and retailers to register with their Food Control
Committees. The next step being to obtain control of supplies,
an Order was issued on 17th January requisitioning the output of
margarine factories and imported supplies on their arrival at the
ports. This Order came into force on 26th January. Having
exact information as to the supplies available each week, the
Food Controller was now able to deal with local shortages by
ordering supplies to be diverted where they were most urgently
required. But until a complete and systematic programme of
distribution for the whole country could be laid down, emergency
action of this kind was like filling up holes in a sieve. Local
shortages were inevitable; all that head-quarters could do was
to vary the incidence of the shortages in such a way as to prevent
discontent breaking out into open rioting. During this period
emergency supplies had to be sent to the districts which clamoured
loudest. Fortunately in January supplies had increased by 20 per
cent. compared with the previous month, and this gave the
Ministry a breathing space in which to complete its plans for the
reorganization of the trade.

The problem of wholesale distribution of margarine was
simplified by facts which differentiated it from other trades. In
most other commodities the usual trade channels consisted of at
least three separate stages and often four: importer or manu-
facturer, broker, wholesaler, retailer. At each stage there was

236 MEAT AND FATS

a complicated network of trade connexions which could only be
broken with much inconvenience and difficulty ; in nearly every
case the Ministry found it necessary to make use of these normal
channels, and to endeavour to give each firm a fair share of the
trade proportionate to his pre-war turnover. To reconcile this
principle with an even flow of goods and a reasonable economy in
transport was difficult; but the goodwill of the trade was
the primary consideration in all these emergency measures, since
without their full co-operation the best-planned schemes were
bound to fail. Endeavours were therefore made not to interfere
more than was absolutely necessary with established trade customs
and particularly to avoid any step that might confer a permanent
benefit or inflict a lasting hardship on any one trader or group of
traders.

In the margarine trade conditions were different. The industry
was a comparatively new one, and had been largely built up
during the war with special facilities from the Government. The
number of manufacturers was few, and many being new to the
business had no established trade connexions. Their relations with
the Ministry, to whom they looked for supplies of raw material
and for assistance in overcoming their difficulties, were close and
cordial. There was no organized wholesale market; no factors
or brokers specializing in margarine; and very few wholesalers.
Even before the war the normal practice was for supplies to go
direct from importer or manufacturer to retailer. When, therefore,
the Ministry took possession of the whole supply, there was
a comparatively clean slate for planning distribution. Vested
interests had not yet grown up, and the way was clear for a
thoroughly systematic organization based on considerations of
economy and convenience. The only important link which some-
times had to be broken was that between the Maypole Company’s
factory and its own multiple shops.

The plan adopted bears a certain resemblance to the machinery
of Meat Distribution. A Margarine Clearing House was established
at head-quarters. The country was mapped out into areas, and
supplies for each area were allocated from the most convenient
source. Within each area the unit for purposes of distribution
was the Food Control Committee.

MARGARINE AND EDIBLE FATS 237

The needs of each Food Control Committee were determined
first by statistics of population, and then, as rationing extended,
by the number of registered customers. Outside London and the
Home Counties the Executive Officer of each Food Control Com-
mittee was made responsible for receiving the supplies and dividing
them up among his registered retailers according to the number
of their customers. Manufacturers received payment for their
output direct from the Ministry of Food; the Ministry paid the
cost of transport by a lump sum credited to the Railway Executive
Committee ; and the local Executive Officers sold to retailers at
a uniform price throughout the country and remitted the proceeds
to the Ministry of Food. The Clearing House was managed by
an Executive Board consisting of representatives of manufacturers,
importers, and retailers, presided over by an official of the Ministry.
The powers exercised by the Food Controller were defined in the
Margarine (Distribution) Order, 1918, dated 23rd March. By
16th June, when the rationing of butter and margarine was finally
extended to the whole of Great Britain, the new machinery of
distribution was working with clock-like regularity, and with
a slight improvement in the supplies available it was possible to
guarantee an increase in the ration from 4 oz. per week to 5 oz.

Control of Quality

An important feature of margarine control was the care
taken to produce a high quality. In the early stages one of the
largest firms agreed to lend to the Ministry the services of one
of their principal experts for the purpose of assisting other manu-
facturers to improve their methods of production. He thereupon
paid visits to most of the new and smaller factories, inspected
their equipment, gave advice on technical matters, and reported
to the Ministry on their capacity and the quality of their output.

In April 1918 a system of sampling and testing was introduced.
Manufacturers sent samples of their production each week to the
Oils and Fats Department, where they were examined by experts
without any indication being given of the maker’s name. Marks
were then given for such qualities as texture, colour, taste, smell,
&c., and the results of the examination giving the week’s order
and any remarks likely to be useful were then sent to all firms.

238 MEAT AND FATS

In August 1918 ninety-six samples were received from factories
in Great Britain, and the average number of marks for the month
was 75 out of 100. The figures for previous months were as
follows :
April May Jgune July
63 64 74 76

The drop of one point in August was due to difficulties ex-
perienced by certain small makers who had not hitherto manu-
factured table margarine but had supplied the baking and
confectionery trades with an article of inferior quality. Under
the Butter and Margarine Act (1907) the amount of moisture
permitted is 16 per cent., but the samples examined during this
period showed an average of only 124 per cent.

The quality of the finished product naturally depended to
a large extent on the quality of the oil supplied. The production
of refined deodorized oil was before the war limited to one or
two firms. Special plant and technical skill were required to
expand its production during the war to meet the growing needs
of the margarine industry, and a careful watch was kept to
prevent any firms wasting valuable raw materials by bad refining.
Margarine makers were asked to send samples of any refined oils
allotted to them which they did not consider reasonably suitable
for margarine making, and these samples were then submitted
to the technical advisers of the Ministry, and chemically tested
in the Government Laboratory. If any refinery was shown by
these methods to be persistently producing inferior oil, an expert
would be sent to examine the factory and make suggestions
for improvement. In the last resort an incompetent firm could
be deprived of raw materials. In addition to casual supplies sent
by margarine makers, the output of refineries was regularly
tested in the same way as margarine. Considerable improvement
in the standard of oil produced is shown by the following figures
of the average marks from April to August 1918 :

April May June July August
Palm-kernel oil =. 4 81 76 88 80 91
Coco-nut oil ‘ . 82 87 66 90 95

The most important test was that showing the content of free
fatty acids. Any considerable percentage renders the oil fit

MARGARINE AND EDIBLE FATS 239

only for soap making. The following figures show a steady
diminution :

April May June July August
Palm-kernel oil . Fi 0-08 0:07 0-06 0-04 0:05
Coco-nut oil , : 4 0-07 0-07 0-04 0-04 0-04

Complaints by consumers, local authorities, or retailers as to
the quality of margarine supplied were also investigated, if par-
ticulars were given as to the source and date of supply. By
means of code marks on the boxes in which it was packed, any
consignment could be traced to the factory which produced it.
It was then possible for the Ministry to determine without much
difficulty whether the fault was due to the inferior quality of the
oils and fats supplied, to bad manufacture, or to delay and
mishandling in distribution.

The same system of control of manufacture, quality, and
distribution was gradually extended to other edible oils and fats,
the most important being fine vegetable oil, supplied to Jews and
Mohammedans as a substitute for lard; nut butter for vege-
tarians in place of meat and lard; compound lard, a mixture of
vegetable oil and fats for cooking purposes ; and shredded suet,
a proprietary article consisting of beef fat and rice. Manufacturers
of these articles were specially licensed and had to conform with
standard specifications as to quality and ingredients. Raw
materials were allotted to them at fixed prices, and they were
required to sell at maximum prices which gave them a fair margin
to cover cost and profit. Samples of their product had to be sent
weekly to the Ministry for testing. Standard specifications were
originally imposed in order to fix maximum prices, since a fixed
price can only apply to an article which can legally be defined.
But the experience gained proved that existing legislation
provided insufficient safeguards for the public health, and that
at any rate during war control of quality was an essential part
of the Ministry’s duties.

Dripping and Tallow
The control of dripping presented certain features of special
interest. Under it competition in quality and decentralization
of control were successfully applied in an unpromising field, and

240 . MEAT AND FATS

an important phase of the price problem arose to which little
attention has hitherto been given, namely, the proper ratio
between the prices of closely related commodities. The principle
of ‘ substitution ’ is an important economic doctrine, which could
not be ignored even under a system of control. The affinities of
dripping to margarine, lard, and butter, on the one hand, and to
industrial tallow and grease on the other, constituted a most
complicated problem.

Dripping as a household expression means the fat that drips
from roast beef. In the trade it means edible fat obtained by
melting or rendering down raw beef or mutton fat, or by the
extraction of marrow fat from beef or mutton bones. The more
general term is edible tallow. When the product is stale and
inedible, it is called technical tallow, and is used for a variety of
industrial purposes, the most important being soap making and
lubrication.

Under the Ministry of Munition’s original Order of the 9th May
1917, the maximum price of imported tallow was fixed at £72 per
ton, and dealings in it were subject to licence. Home melt tallow
escaped control ; no price was fixed, and dealings in it were un-
restricted. The result was that in 1918, whereas imported tallow
still stood at £72 per ton, home melt tallow had risen to about
£150 per ton wholesale. A recommendation that home melt
tallow should be controlled was made by the Soapmakers Advisory
Committee in October 1917. They suggested a scale of maximum
prices varying from £50 per ton for the lowest quality to £71 for
the best industrial tallow, the maximum for edible dripping and
bone-fat being £85 per ton. The Ministry realized, however, that
if prices were fixed by the ton and quantities less than a ton were
allowed free, at least 70 per cent. of the production would escape
control. The soapmakers would find their supplies cut off, and
dripping would still be sold over the counter at extortionate prices.
On the other hand, the suggestion that the price should be fixed
at so much per pound raised a host of difficulties.

If the maximum price of imported tallow was taken as the
basis, the retail price of home melt tallow should be not more
than Is. per lb. This would mean, however, that the best raw
fat would have to be fixed at 7d. or 8d. per Ib. At such a price

MARGARINE AND EDIBLE FATS 241

it would pay butchers not to sell fat as such at all, but to sell it
adhering to the meat at prices up to 2s. per lb. On the other
hand, if the price of dripping were fixed at 2s. per lb. it would
be out of all proportion to margarine at 1s. per lb. Lard was
ls. 8d., vegetable lard 1s. 6d., and suet 1s. 6d. As these were all
possible substitutes for dripping, ls. 6d. per lb. appeared to be
the right price. This, however, would only be possible if the raw
material of dripping were fixed at corresponding prices. The best
raw fat could not be fixed at less than 1s. 1d. per lb. But at this
level for fat the Ministry were assured that dripping could not be
produced for less than Is. 8d. wholesale and 1s. 10d. retail. This
figure was therefore decided upon. A schedule of raw fat prices
divided into ten classes was drawn up and agreed between repre-
sentatives of the meat trade and the home melt tallow trade, and
Orders were prepared fixing the prices of raw fat, dripping, and
technical tallow. Events proved later that 1s. 10d. was somewhat
too high ; but compared with the prices charged before control
was imposed, which ran up to 2s. 6d. and even 3s. per lb., it
represented a substantial reduction.

The next problem was to arrange for organized control of the
collection of raw fat, and the manufacture of dripping and tallow.
Following the practice which had successfully been applied in
other trades, the Ministry took the initiative in getting the tallow
melters organized into a national association. The proposal was
well received. A trade that had hitherto had no organization of
any kind, no cohesion or corporate spirit, and little self-respect or
pride in its humble and unpleasant task, was now recognized as
performing an essential national service, and was gratified at
being invited to undertake the regulation of its own affairs on
behalf of the Government.

The plan agreed upon was as follows: The Tallow Melters
Association was to act as the sole agency for the collection, pur-
chase, and treatment of all beef and mutton fat not sold in ex-
change for meat coupons. Every tallow melter who could prove to
the satisfaction of the Ministry that he was equipped with suitable
plant and was able to deal with fats entrusted to him in an efficient
and economical manner, was entitled to become a member of the
Association. Each member was licensed by the Ministry of Food,

1569.53 R

242 MEAT AND FATS

and no person or firm could trade in or handle fats without a
licence. His licence might be withdrawn at any time, in which
case he would cease to be a member of the Association. For
purposes of administration Great Britain was divided into areas,
each of which appointed members to serve on an Advisory Com-
mittee in London and advise the Ministry on all matters relating
to the trade. Three Sub-Committees were appointed, an Efficiency
Sub-Committee, a Collection Sub-Committee, and a Commercial
Sub-Committee. The duties of the first were: (1) to investigate
claims for membership of the Association, (2) to see that every
applicant had suitable machinery and equipment, (3) to fix the
nominal capacity of each works or factory, (4) to see that means
were devised to ensure that each member dealt efficiently with all
fat entrusted to him, (5) to see that no fat was allowed to perish
owing to defective collection, (6) to arrange that as much edible
fat as possible was produced, and that the remainder should be
available for glycerine and any other essential trades. The duties
of the Collection Sub-Committee were: (1) to devise means of
collection and distribution of raw materials, (2) to allocate raw
materials to each member in proportion to factory capacity, as
agreed by the Efficiency Sub-Committee, (3) to see that the most
economical use was made of transport facilities and that no
materials were allowed to perish by tardy deliveries, and (4) to
direct supplies of raw materials so that each area was as far as
possible supplied in accordance with its total factory capacity. The
Commercial Sub-Committee was to deal with all questions relating
to fixing of prices, classification of materials, and settlement of
commercial disputes. In each area a Local Committee was
appointed with corresponding sub-committees working in com-
munication with head-quarters. The local committees were to be
executive bodies carrying out the policy laid down by the Ministry
of Food on the advice of the Advisory Committee and its sub-
committees. To secure co-ordination with other trades it was
arranged that a Joint Advisory Committee should also meet from
time to time, consisting of representatives of retail butchers,
glue manufacturers, bone users, hide and skin merchants, whole-
sale butchers and tallow melters, to discuss points of common
interest. '

MARGARINE AND EDIBLE FATS 243

On June 12, 1918, legal effect was given to the new control
by three Orders, the Raw Beef and Raw Mutton Fat (Licensing
of Purchases) Order, the Home Melt Tallow and Greases (Maximum
Prices) Order, and the Home Melt Tallow and Greases (Requisi-
tion) Order. Under the first Order. licences were required for
dealing in raw fat, and for rendering, melting, or treating any
such fat for sale. The second Order fixed maximum prices for
technical tallows and greases and for edible fat or dripping, and
prescribed the exact composition of each article. Edible tallow
was defined as follows :

(i) It shall have been manufactured in the United Kingdom from raw
beef fat, or raw mutton fat, or beef or mutton bones.

(ii) It shall have been so manufactured by a process other than the
acid process ; and

(iii) It shall not contain more than 1 per cent. water and impurities
(taken together) or more than 2 per cent. of free fatty acids.

Any bone fat or dripping not complying with these requirements
was to be deemed to be technical tallow, and its maximum price
determined accordingly. The highest price for the best industrial
tallow was only £91 per ton compared with 1s. 8d. per lb. or £187
per ton wholesale for edible quality. A strong incentive was
thus given to the tallow melter to produce as much dripping
as possible ; similarly, the butcher who sold good fresh fat to the
tallow melter received 1s. 1d. a lb. compared with 11d. per lb. for
inedible fat which he had allowed to go stale. Lastly, under the
third Order the output and stocks of home melt tallows and
greases were requisitioned as from 9th June, and manufacturers
were required to keep records showing the cost of manufacture
and the price of materials supplied to them.

The standard specification prescribed for dripping formed the
basis of a system of sampling and testing similar to that introduced
for margarine and refined oils. A most astonishing improvement
in quality was recorded month by month. Each week the pro-
portion of edible dripping produced increased, and the quantity
of technical tallow unfit for human food diminished. The figures
for each area were published weekly in order of merit. Aberdeen
and Manchester were always high ; London started low. A spirit
of emulation between areas grew up. Local Committees competed

R 2

244 MEAT AND FATS

with one another in improving the standard of production. The
Chairman of the Yorkshire Committee is said to have appealed
to his fellow Yorkshiremen to bestir themselves with the words :
‘We beat Lancashire in cricket. Shall we allow them to beat us
in fat-melting ?’ Within a short time the production of dripping
had reached between two and three hundred tons a week, which
formed a useful addition to the nation’s scanty fat ration.

CHAPTER XxX
MILK, BUTTER, AND CHEESE

Shortage of milk during winters of 1917 and 1918 — Statistics of production
and consumption — Condensed milk — Organization of the trade — Importance
of wholesale firms and milk factories — Report of Sub-Committee on wholesale
trade in milk — Waste, overlapping, and unequal distribution due to lack of
co-ordination — Scheme of control proposed — State purchase recommended
— Temporary measures of control adopted — Wholesale rationing and priority
— Work of Divisional Commissioners — Introduction of certified grades of
milk.

Purchase of Australian and New Zealand cheese for the Army by the Board of
Trade — Ministry of Food negotiates voluntary price agreements, April 1917 —
Legal maximum prices, August 1917 — Extension of cheese control — Control
of butter prices — Centralization of import, December 1917 — Functions of
Butter and Cheese Imports Committee — Long term contracts and purchases
in open market — Argentine, South Africa, Canada, United States, Denmark,
France, Holland — Pooling of purchases and averaging of prices — Results of
policy adopted.

In spite of the importance of fresh milk from the point of view
of public health the normal production and consumption of milk
is far less than the real needs of the population would seem to
require. During the war the normal deficiency was accentuated
by various circumstances, and during the winters of 1917 and
1918 the shortage gave cause for anxiety. A few statistics will
illustrate the difficulties facing the Ministry of Food.

In 1908 a Census of production was taken which showed the
number of cows in Great Britain to be 2,197,763 and the average
daily production of milk per cow to be 1-15 gallons for the twelve
months ended June 4, 1908. During the summer of 1918 a census
of milk production for the week ending June 4 showed that there
were almost exactly two million cows in Great Britain with an
average daily production during that week of 1-97 gallons. Since
June is a particularly favourable month for milk production, the
average for the twelve months ended June 4, 1918, would certainly
have been found to be lower than the 1908 figures. It was esti-
mated that during the winter of 1918, which was the worst period
of milk production since the outbreak of war, supplies were
25 per cent. below the normal pre-war level of winter production.

The principal reasons for this reduction were, first, the shortage

246 MEAT AND FATS

of labour, and secondly, the scarcity of feeding stuffs, caused by the
requisitioning of hay for the Army, by the partial failure of the root
crop, and by the severe restriction of imports. On the side of con-
sumption, the demands of military hospitals and the recurring
influenza epidemics caused an abnormal drain on supplies.
According to estimates made in the winter of 1918, the supplies
available for all purposes were barely sufficient for a quarter of
a pint per day per head of the population. The actual con-
sumption as shown by statistics obtained from retailers in January
1918 varied very widely in different parts of the country. The
consumption by areas varied from 0-31 of a pint in the London
area to 0-1 in Inverness-shire, and by towns from 0-67 and 0-63
in Winchester and Hornsey to 0-08 and 0-06 in Dudley and
Llanelly. An important consequence of these wide variations,
which depended partly on the habits and partly on the purchasing
power of the inhabitants, was that any attempt to establish
a uniform rationing of milk had to be abandoned. Throughout
the war attention had to be concentrated on securing priority for
the more essential needs, viz. supplies for children, invalids, and
mothers. Special measures were also taken to meet local and
seasonal shortages of fresh milk by regulating the sale and distribu-
tion of condensed and dried milk. The consumption of condensed
milk was naturally much greater in industrial than in rural areas.
During 1917 the consumption of condensed milk per head of the
population was sixteen tins per annum in London and fourteen
tins in South Wales, whereas in East Anglia and North Wales the
figures were only five and four respectively.

In the organization of the milk trade the part played by whole-
sale firms is of special importance. Throughout the greater part
of the country the farmer sells his milk direct to a retail dairyman
without the intervention of a third party, but in the large towns,
and in the industrial districts of the North of England, the bulk
of the milk passes through the hands of wholesale distributors.
The largest of these wholesale houses is the United Dairies Limited,
commonly known as the London Milk Combine, which supplies
something like 90 per cent. of the milk distributed in London and
owns a large number of retail shops for sale direct to the consumer.
In the milk trade both supply and demand are subject to seasonal

MILK, BUTTEP, AND CHEESE 247

fluctuations. During the spring and early summer there is always
a larger production than in the autumn and winter months. It
is therefore difficult for supply and demand to adjust themselves
automatically without waste. A large wholesale firm can deal with
this problem more satisfactorily than a large number of individual
retailers and farmers. By establishing milk depots and factories
in convenient situations in the producing areas, a large firm like
the United Dairies Limited can make use of any surplus supplies
for manufacturing condensed milk, dried milk, and butter. Supply
and demand can then be constantly adjusted by absorbing a
greater or smaller quantity in the manufacture of milk products.
When the supply increases, the surplus goes to the factory ; when
there is a shortage, supplies can be diverted from the factory direct
to the retail shop. A proper organization of the wholesale trade
is therefore an essential condition of scientific and economical
distribution. How far from perfect was the organization existing
when the Ministry of Food turned its attention to the problem
will become evident from the extracts given below from official
reports on the distribution of milk.

In April 1917 the President of the Board of Agriculture
appointed a Committee, known as the Astor Committee, with
instructions to report on the production and distribution of milk,
and among other matters to consider the steps which should be
taken ‘ to effect economies in the cost of production and distribu-
tion and to organize supplies by administrative action so as to
reach all sections of the community’. In February 1918 the
Committee recommended that in view of the probable scarcity of
milk during the coming winter, the Government should establish
new milk depots so as to increase the supply of milk and milk
products, and that the Food Controller, through the Milk Section
of the Ministry of Food, should ‘take over the control of the
wholesale collection, utilization, and distribution of milk’. A
Sub-Committee was then appointed under the Chairmanship of
Mr. Wilfred Buckley, C.B.E., Director of Milk Supplies. The
report of this Sub-Committee summarizes in convenient form the
difficulties to be faced and the main lines of organization necessary
for dealing with them.!

1 Cd. 9095, 1918.

248 MEAT AND FATS

The Committee examined twenty-one witnesses including
farmers, retailers, and wholesalers, and summed up the difficulties
of the existing situation as follows :

The evidence before the Committee has called special attention to the
following difficulties :

1. The wasteful competition in the collection and handling of milk by
superfluous depots or factories situated in the same area.

2. The lack of equal distribution of dairy utensils.

3. The diversion from factories or depots of milk produced in the
immediate neighbourhood.

4. The uneconomical diversion of milk from one geographical area to
another.

5. The unequal supplies that reach various consuming areas in pro-
portion to requirements.

6. The difficulty in suitably allocating the amounts of milk that are
required (a) for the manufacture of milk products, (b) for human con-
sumption.

7. The need for a proper organization to balance supplies and to convert
surplus milk into milk products.

8. The unnecessary amount of transportation that takes place by road
and by rail in the collection and wholesale distribution.

9. The unnecessary waste of man-power, horse-power, &c., in retail
distribution.

10. The fear that large organizations if uncontrolled will ultimately
result in a single buyer in particular districts which would have a pre-
judicial effect on production.

11. The fear that large combinations of traders if uncontrolled may
result in single sellers in particular districts and thereby place consumers
in the hands of a monopoly to the possible detriment of quality, price,
hours of delivery, &c.

12. The need for encouraging the production of cleaner and better
milk, thereby (a) making a more wholesome supply, and (b) preventing
waste.

13. The damage to and loss of milk caused by: (a) delays and un-
hygienic conditions on railways; (b) insufficient treatment prior to
transit, such as lack of cooling ; (c) unsatisfactory size and type of churn
in common use; (d) churns not being locked or sealed throughout transit.

14. The fixing of a uniform maximum price removes incentive to the
production of milk of high hygienic quality.

These fourteen points throw an interesting light on the relative
merits of competition and combination. Whatever the merits of
competition in general, the Committee concluded that competition
in milk distribution is wasteful and uneconomical, and that

MILK, BUTTER, AND CHEESE 249

a satisfactory solution of the problem is only possible by centraliza-
tion and organized planning of the wholesale trade. The first
eight points all emphasize the impossibility of adjusting supply
and demand in the most economical and convenient way without
deliberate planning and co-ordination. The absence of a single
planning authority involved waste, overlapping, unnecessary
transport, and unequal distribution of supplies. Clause 9 mentions
that the same phenomenon exists in the retail trade. Clauses 10
and 11 state the two chief objections to any extensions of the
process of combination and unification in the wholesale trade.
The farmers feared that such a trust would be able to dictate prices
and depress production. On the other hand consumers might find
that the trust would raise the selling price and give inferior service.
The last three clauses emphasize the importance of improving
the quality of milk and treating it in a more hygienic manner.
In particular there was a danger that a uniform maximum price
would discourage the production of milk of the highest quality.

The plan proposed by the Sub-Committee for meeting these
difficulties was to take over all the large wholesale firms and employ
them as Government agents. By this means a single wholesale
organization would be created for the whole country, and would
be run as a public concern in the interests of producers and
consumers alike. The actual scheme of control, which was
recommended by the Sub-Committee and endorsed by the main
Committee, was as follows :

ScHEME FOR CoNTROL OF MILK DISTRIBUTION IN GREAT BRITAIN

1. The objects to be aimed at are the maintenance of the milk supply,
the economical handling of milk, its equitable distribution and the full
utilization of surplus supplies for manufacturing purposes.

2. For the purposes of controlling the distribution of milk Great
Britain should be divided into suitable areas.

3. Milk Superintendents should be appointed in each area to take
charge of the local distribution of milk and to act under the instructions
of the Central Authority in London, with a separate Advisory Committee
for Scotland meeting in Edinburgh and under the Central Authority in
London. They should have access to the statistics and information in the
Live Stock Commissioners’ possession.

4. A National Milk Clearing House should be set up in London which
should control the wholesale milk trade of the country and employ persons,

200 MEAT AND FATS

firms, or societies, who are licensed to deal in milk by wholesale as
authorized wholesale milk agents, as far as is necessary.

5. The Clearing House should take over existing contracts between
wholesalers and producers, but would interfere as little as possible with
direct contracts between producers and retailers. Such contracts would,
however, be subject to the supervision and the approval of the Milk
Superintendent for the area in which the retailer may be situated.

6. All milk churns in the possession of wholesale dealers other than
retail delivery churns would be taken over and become the property of
the Clearing House.

7. Manufacturers whose primary business is the manufacture of milk
products would be authorized to act as wholesale agents of the Clearing
House and would be required to manufacture dried milk, cheese, or other
products, on account of and in accordance with the instructions of the
Clearing House.

8. In the organization of the wholesale trade during the war, the
power of wholesale traders may be strengthened or in some cases dis-
organized for the period after the war. It is therefore recommended that
in constituting traders agents of the Ministry of Food, the Government
should at once obtain an option to purchase the businesses of such traders
at a fair valuation to be arrived at by negotiation or by arbitration, as
experience may show the ultimate necessity of the State becoming the
sole wholesaler of milk, a development which this Committee considers
to be desirable.

9. It should be the policy of the Clearing House to encourage producers
to form themselves into Co-operative Associations for the purpose of
improving the conditions of milk production and for the manufacture
of cheese.

10. It is recognized that milk should be produced and supplied under
improved conditions so that it may be more clean and wholesome when it
reaches the consumer. Any improvements that can be effected, by
grading or otherwise, should be made in such a way as to anticipate the
lines of future requirements.

The Sub-Committee is of opinion that the most suitable locations for
the establishment of new milk depots cannot be properly determined in
the absence of knowledge that can only be obtained by the exercise of full
control over the wholesale trade.

With regard to clause 8, recommending State purchase of the
wholesale milk trade, which was carried in the Sub-Committee by
a majority of ten to five, the main Committee reported that before
they came to any decision, more evidence was required with
regard to the financial terms and to the practical needs and effects
of purchasing the entire milk trade of the country; but at the
same time they recommended that ‘steps should be taken to

MILK, BUTTER, AND CHEESE 251

determine the basis on which the interests could be acquired, should
this be deemed advisable at any time by the Government’.

The plan of State purchase was not proceeded with, though
preliminary negotiations with the large wholesale concerns showed
that there would have been no serious difficulty in arriving at
a method of valuation which would have been satisfactory to both
parties. The plan fell through mainly because of the reluctance
of the Cabinet to take any step involving the extension of State
ownership as a permanent policy and the opposition which the
proposal was certain to encounter in Parliament; and though
the farmers’ representatives might have preferred a State mono-
poly to a private combine, hopes were entertained at the time
that wholesale milk distribution would be managed after the war
by farmers’ co-operative societies. Though the milk trust was
not popular with either the consumers or agriculturists and
was exposed to unfair and often misinformed attacks in the
Press, there was not sufficient agreement amongst reformers, or
sufficient backing from public opinion, to induce the Government
to buy out the trust or even to obtain an option to purchase.
Consequently this plan, like the similar scheme which was brought
forward and considered about the same time for State purchase of
the liquor trade, never bore fruit.1

Temporary measures of control were, however, adopted.
About eight hundred wholesale firms were taken over by the
Ministry of Food under the Wholesale Milk Dealers (Control)
Order, 1918, under which all premises used for the purpose of
wholesale dealing in milk and for the manufacture of milk products
came under the Ministry’s control.

The administrative machinery bore a certain resemblance to
‘the meat and live stock organization. At head-quarters there was
a Milk Control Board, which included the principal administrative
officials, and four representatives of farmers, traders, and con-
sumers; a Central Milk Advisory Committee consisting . of
twenty-five persons, representing Government Departments,
Members of Parliament, wholesalers, retailers, farmers’ co-
operatives, consumers’ co-operatives, and manufacturing con-
sumers of milk; and a Financial Advisory Committee of seven
persons to deal with financial questions and advise on the terms

1 For Lord Rhondda’s views see Appendix 14.

252 MEAT AND FATS

to be made between the Ministry and the controlled firms. A
Scottish Milk Board and Advisory Committee were established
to administer control in Scotland. Assistant Commissioners for
milk were appointed on the staff of Divisional Food Commis-
sioners in each of the Food Divisions of the country, and Local
Advisory Committees were set up which included representatives
of the wholesale and retail trades, of the Public Health authorities,
and of the local Food Control Committees.

Under the Milk (Distribution) Order, 1918, which came into
force on October 5, power was taken to regulate purchases and
sales, and to require any producer or dealer to sell or deliver milk
-to any person or place. This power to divert supplies where
required at any time was delegated to the Divisional Com-
missioners, who kept a constant watch on deliveries to the
Food Committee Areas in their Division and were immedi-
ately informed of any actual or prospective shortage. Since the
normal flow of supplies was regulated by long-term contracts
between farmers and retailers, or between farmers and wholesalers,
there was no need for official intervention except in the marginal
cases. The normal quota was ascertained for each area and for
each Division ; and with the aid of these statistics, and the figures
available as to supplies coming forward, arrangements could be
made for meeting shortages, either by diversion of supplies from
milk product factories, or by a general reduction of the quota over
a wide area. By this system of wholesale rationing each retailer
could be assured of his fair proportion of the available supplies,
though no attempt was made to ensure uniform distribution to
individual consumers throughout the country as under the meat
rationing scheme. Individual consumption was regulated by
a series of measures designed to give priority to essential require-
ments and to restrict the less essential. Thus, under the Milk
(Local Distribution) Order, 1918, the Food Control Committees
were empowered to require retailers to supply the needs of infants,
invalids, expectant mothers, and special institutions before other
customers ; to limit the amount to be supplied to ordinary
customers ; and to require every customer to be registered with
one retailer. Measures were also taken to restrict the consumption
of milk in restaurants and hotels, to regulate the making and sale

MILK, BUTTER, AND CHEESE 253

of cream, and to prohibit the use of fresh milk in the manufacture
of chocolate and confectionery.

By this means, in spite of the shortage of milk during the
winters of 1917-18 and 1918-19, priority demands were met
without difficulty, and distribution to ordinary customers could
be regulated fairly evenly. Improvements in the methods of
handling milk and more economical organization of transport
gradually received attention, but progress in this direction had
not gone far before the milk trade was decontrolled. The most
important permanent reform was the introduction of a system
of official grading, under which milk certified to be free from
tubercular infection might be sold either as grade A or as grade B.
Grade A milk had to obtain not less than 80 marks for purity and
cleanliness, and grade B not less than 60 marks, on the score
card system adopted by the Ministry of Health. This reform
benefited the producer as well as the consumer; for higher
maximum prices were allowed for certified milk under control,
and higher prices have been obtained in the open market since
decontrol took place.

Butter and Cheese

The first intervention of the Government in the butter and
cheese trade was the purchase by the Board of Trade of Aus-
tralian and New Zealand cheese for the British Army. The whole
exportable surplus of Australia and New Zealand for the 1916-17
season was bought at a fixed price. In May 1917 the Board of
Trade began to resell a part of the supplies not required by the
Army for civilian consumption, employing the usual importers
and wholesalers as distributing agents.

The Ministry of Food first took action in April 1917, when the
steady falling off in the supplies of home produced and imported
butter and cheese was leading to a rise in price. Conferences were
arranged with representative importers and wholesalers, and an
informal agreement was made with the various Produce Exchanges
that certain agreed prices should not be exceeded by members
dealing on the exchanges. This voluntary agreement, however,
proved ineffective and prices continued to rise.

After the failure of voluntary control the next step taken was

254 MEAT AND FATS

to fix legal maximum prices. This policy met with the general
approval of the trade, and after taking expert advice the Food
Controller issued a series of Maximum Price Orders for Butter and
Cheese between August and September 1917. The general
principle was to fix only the first-hand price at a definite figure
leaving the price at the latest stages to be determined by the
addition of the actual charges incurred and a limited profit. The
wholesaler was not allowed to add more than 7s. 6d. per cwt.
over and above charges for transport and storage, and the re-
tailer was allowed to add 24d. per lb. to.cover his expenses
and remuneration.

On May 29, 1917, the Food Controller issued an Order
requisitioning all cheese arriving from the United States and
Canada.1_ By this means the Government obtained control of the
bulk of the imported cheese which was not already being purchased
by the Board of Trade. Supplies were distributed through the
ordinary trade channels in proportion to the amount handled by
each trader in 1916, the retail price being fixed at 1s. 3d. per lb.
In January 1918 the Ministry of Food took over from the Board of
Trade the responsibility of supplying cheese for the Army, and
in the course of 1918 Government purchase was extended to Dutch
cheese in March, British hard cheese in June, British and Irish
Caerphilly cheese in July, and Irish hard cheese in November. A
Cheese Advisory Committee, representing the various interests
concerned with home produced and imported cheese, was appointed
in January 1918 and was consulted throughout the period of
control on all important questions of policy and administration.

The first Butter Maximum Prices Order, which came into
operation in September 1917, was fairly successful in steadying
the retail price at about 2s. 4d. to 2s. 6d. per lb., but one or two
varieties of butter which had not been included in the Order, such
as Danish butter, continued to rise and at one time were sold
retail at as much as 4s. 6d. to 5s. 6d. per lb. Moreover, imported
butters were sometimes sold as uncontrolled varieties. Further
orders were therefore made in October and November controlling
the price of all butters sold in Great Britain.

It was realized from the first that the policy of fixing statutory

1 Cheese (Requisition) Order, 1917, S. RB. O. 510.

MILK, BUTTER, AND CHEESE 209

maximum prices would not be sufficient and would become
positively dangerous if prices in other countries rose above the
corresponding level fixed at home. The Ministry of Food therefore
turned its attention in the autumn of 1917 to the organization of
Government purchase of imported supplies. Towards the end of
1917 the shortage of butter, combined with the falling off in mar-
garine imports, created a dangerous situation. The figures for
butter imports during the last few months of the year have been
given in the previous chapter. One of the immediate difficulties
which had to be faced was that it no longer paid private importers
to purchase butter from Denmark and Holland, where the prices
were considerably higher than the maximum prices enforced in
Great Britain. The Government therefore decided to centralize
the import of butter, and in order to secure this object the importa-
tion of butter on private account was prohibited by order of the
Board of Trade in December 1917.

On December 21, 1917, a Butter and Cheese Imports Committee
was established by the Ministry of Food for the purpose of handling
the import of butter and cheese on Government account. The
constitution of the Committee provided that it should consist of
not more than ten members, including seven traders, all of whom
were appointed by the Food Controller. Subject to the general
supervision of the Food Controller its functions were to operate as
an independent trading concern and to be responsible for looking
after the purchase, shipment, discharge, inspection, storage, and
distribution of butter and cheese. The financing of purchases was
to be arranged either through the Treasury or with the approval
of the Treasury through private firms or banks. Its trading
operations were financially guaranteed by the Treasury.

Where possible long-term contracts were made for the whole
of the exportable surplus of producing countries. Purchases were
made in this way from the Australian and New Zealand Govern-
ments at prices agreed in advance for each season, with a proviso
that any profits on resale in Great Britain were to be shared with
the Dominion Governments. In the Argentine, where no bulk
contract was possible, a Buying Committee was established con-
sisting of representatives of British firms in the Argentine called
the Butter and Cheese Export Committee. Purchases were made

256 MEAT AND FATS

f.0.b. from time to time in the open market, out of funds proves
by the Treasury in Argentine currency.

In South Africa the exportable surplus was purchased f.o.b.
at prices agreed from time to time through a Buying Agency
appointed by the Ministry of Food. Payment was made against
shipment, the necessary funds being provided for the Butter and
Cheese Imports Committee by a South African Bank.

In Canada a buying agency called the Canadian Dairy
Produce Commission was established as a branch of the British
Food Mission in the United States. Purchases of butter and
cheese were made at prices agreed with the Food Board of
Canada.

In the United States purchases for export on private account
were prohibited by the United States War Trade Board. Until
May 1918, purchases were made by the British Food Mission in the
open market up to quantities approved by the United States
Food Administration. After that date the supplies of butter
required by the Allies were requisitioned for them by the Food
Administration.

Danish butter was obtained by special arrangements made
with the Foreign Office and the Treasury. The British share of
Denmark’s exportable surplus was purchased at export prices
fixed by the Danish Government which were more than double
the prices paid in Australia, New Zealand, and the Argentine.
The loss incurred on the resale of butter in Great Britain was
partly recovered by means of a special export tax imposed on coal
shipped from Great Britain to Denmark.

Occasional purchases of butter were made with the per-
mission of the French Government at current market prices
direct from the producers, payment being made by the Butter
and Cheese Imports Committee in French francs provided by the
Treasury.

Dutch cheese was purchased f.0.b. by a buying agent appointed
by the Ministry of Food whenever considerations of finance and
shipping rendered it possible. Private importers were also per-
mitted to import Dutch cheese on private account subject to
requisition on arrival at the maximum first-hand price.

In the case of both butter and cheese, the selling prices were

MILK, BUTTER, AND CHEESE 257

determined by pooling the cost of all purchases made by the
Ministry of Food and striking an average from time to time. In
the summer of 1918 the cost of butter in the different countries
of origin varied very widely as the following figures show :

Price of butter

per cwt. f.o.b.
Denmark i 3 A A . 462s,
U.S.A. . A A : : 5 205s.
Canada . ; : 3 é : 200s.
Argentine ° : p é ° 170s.
South Africa . . A C 6 170s.
New Zealand . : 2 5 5 157s.
Australia = c ; Q * 151s.

As a result of pooling, butter was sold at a fixed retail
price of 2s. 6d. per lb. from January to June 1918, when it was
reduced to 2s. 4d. per lb. The original price was restored on
December 16, 1918, and continued unchanged until January 1920,
when it was raised first to 2s. 8d. and then to 3s. per lb. Govern-
ment cheese was fixed at Is. 8d. per lb. and remained at this figure
till 1920 except for a drop of 2d. per lb. between March and
December 1919.

In fixing the prices paid to the farmer for British butter and
cheese regard had to be had to the prices fixed for milk. The policy
adopted was to encourage the conversion of surplus milk into
cheese rather than butter, and consequently the maximum price
of British butter was deliberately fixed below the parity of milk
and cheese prices.

The operations of the Butter and Cheese Imports Committee
represented an annual turnover of about £50,000,000. Importers,
wholesalers, and retailers were employed as agents to distribute
supplies at rates of commission which gave a reasonable remunera-
tion for their services. In view of the world shortage of dairy
products and the wide variations in price in the different countries
of origin, the monopoly exercised by the British Butter and Cheese
Imports Committee was the only means of protecting the con-
sumer. As Mr. Clynes explained in the House of Commons on
February 27, 1918, the consumer obtained every ton of butter
that could be shipped from all parts of the world at the average
cost price and this was only possible by virtue of Government

1569.53 g

208 MEAT AND FATS .

monopoly of imports. ‘If prices had been controlled and the
import left in private hands, supplies costing more than the
maximum price here would not have arrived. On the other hand,
if prices had been left uncontrolled in order to attract the maxi-
mum quantity of imports, the general level of price of all butter
would have risen at least as high as that of the most expensive
imports.’

PART IV
COMPARATIVE STUDIES

CHAPTER XXI
THE PROBLEM OF WAR ORGANIZATION

Two axioms: subordination of private interests and as little interference as
possible — Distrust of State management — ‘ Business as usual ’ — Nationaliza-
tion of armament industry rejected in 1914 — Contrast with Government action
in regard to finance, railways, and sugar — War profits a legitimate expectation
for armament shareholders — First year of war — Obtaining supplies — Specula-
tion replaced by collective agreement — The price problem — Growth of control
in the second year — State purchase of raw materials — Further developments
in third and fourth years.

Principles of war organization — Economy of man-power, finance, transport,
production, and consumption — Impossible to realize fully in practice —
Psychological factors.

TuHrovucuout the war there were two phrases which must have
been repeated many hundreds of times, in scores of different
contexts— Every private interest must be subordinated to the
successful prosecution of the war’ and ‘ There must be as little
interference as possible with the normal channels of trade’. These
two phrases were axiomatic and commanded universal assent ;
but like most first principles their meaning varied according to
circumstances and they were differently applied at different
periods of the war. In conferences between Government officials
and trade representatives there was no dispute as to their abstract
truth ; controversy arose as to their interpretation and application
to a particular case. Each side used the words in a different sense,
and, like Humpty Dumpty, ‘paid them more and made them mean
what they liked’.

The real problem was to determine the exact degree of
interference with normal trade channels which was necessary for
the successful prosecution of the war. On this question opinions
varied considerably at different times and among different persons.
In the abstract there was an almost universal bias against State

B2

260 COMPARATIVE STUDIES

interference. Manufacturers and traders naturally believed in
freedom of trade, the rights of property, and the merits of laisser-
faire; they had a deep-rooted dislike for the restrictions on
individual liberty and private enterprise which State Socialism
implied. By a process of rationalization this instinctive antipathy
gave rise to the axiom that State management was necessarily
incompetent and that Government interference would therefore
only make matters worse. If this were true it followed that to
substitute an inefficient for an efficient system of industrial
organization just when the nation was fighting for its existence,
would be suicidal folly. Nor was the attitude of Ministers and
Departmental officials very different. They distrusted the power
of the Government to intervene successfully in matters on which
there was no past experience to serve as a guide.

The development of war-time control was thus due almost
entirely to the overwhelming force of circumstances and hardly
at all to a deliberate policy of State intervention consciously
thought out and consistently applied. The conflict between the
private interests of individual traders and the general interest of
the nation considered as a fighting unit was never resolved by
a clear enunciation of general principles, but only gradually and in
part, by piecemeal adaptations and convenient compromises.
Conscription for the Army was eventually accepted as inevitable,
and was applied as a fixed principle; but conscription of trade and
industry was never adopted as a consistent policy to be applied
impartially all round. As the war proceeded conscription of trade
and industry was seen to be necessary if the nation was to put
forth its maximum fighting power. But such an idea would have
been scouted at the beginning of the war. And even at the end of
the war it was only being applied in a half-hearted and unequal
manner.

During the early stages of the war ‘ business as usual ’ was the
accepted doctrine. Traders and manufacturers were encouraged
to carry on, as if nothing had happened. During the first few
months the great problem was to combat unemployment and get
the wheels of industry restarted in the normal channels or, if that
was impossible owing to the blockade of Central Europe, to open
new markets in other parts of the world. In the absence of any

THE PROBLEM OF WAR ORGANIZATION 261

plan of industrial mobilization for war, this was the only possible
policy to pursue. A prosperous state of trade, regular employment
at good wages and high profits for the Revenue to tax and the
Treasury to borrow, were regarded with good reason as essential
conditions for the successful prosecution of the war. But the same
general ideas were reflected in another sphere, where the justifi-
cation was less obvious.

The vast and unprecedented demand for arms and ammunition,
which arose almost as soon as war broke out, was as early as October
1914 seen to be much greater than the existing armament firms
could meet in the time required. In these circumstances it was
proposed in the War Office that the Government should nationalize
the armament firms, first, in order to make sure of supplies, and
secondly, to protect itself against the high prices which must
necessarily result under conditions of laisser-faire. This proposal
proved premature. To interfere with the private business of
the armament manufacturers, on whose goodwill and loyal co-
operation the safety of the country depended, and to undertake
the heavy responsibility of direct Government management of
a highly technical industry, was too great a risk to take and too
openly in conflict with accepted economic doctrines.

It may appear inconsistent with this explanation that the
Government had already adopted three measures of State inter-
ference of at least equal magnitude. They had guaranteed the
solvency of the banks and discount houses by placing the credit of
the nation behind approved commercial bills payable by enemy
and other debtors, who were unable to meet their liabilities. They
had taken over the railways of the country by an agreement which
guaranteed them their pre-war dividends. And they had set up
a Royal Commission on Sugar Supply to monopolize the purchase
and import of sugar on Government account. But in each of these
cases there were special circumstances which made State inter-
vention easier and indeed almost inevitable. The first course was
a bold measure to save the financial system of the country from
collapse, but its effect was not so much to interfere with the
private interests of the financial houses as to protect them from
bankruptcy. The national interest was in no conflict with the
private interests of the firms affected. In the case of railways,

262 COMPARATIVE STUDIES

the step taken had been prepared long beforehand and was
accepted by all parties as necessary on military grounds. It was
in fact an essential part of the plan prepared by the War Office
for the rapid mobilization and dispatch of the Expeditionary
Force to Flanders. In the third instance also, action was rendered
easier by the abnormal state of the sugar market, when supplies
from Central Europe were cut off, and by the anxiety of the large
sugar refiners to obtain their raw material. Here again action was
taken not so much against the interests of the trade as to protect
them. The particular and the general interests were identical.

In the armament industry, however, conditions were different.
The Directors of these large concerns had to consider the interests
of their shareholders. Their businesses had been built up in times
of peace, when the demand for their products was relatively slight.
From the commercial point of view it was only reasonable that
the shareholders should be able to make good in war what they had
failed to reap in peace. If they were not allowed to make high
profits in war-time, when their products were most needed, it
would be difficult to attract capital into the business ;_ the share-
holders would consider that the Government had treated them
unfairly; and if the nation broke faith with them in such a manner
and deprived them of the fruits of their legitimate expectations,
they could not be expected to give such good services in the future
as in the past. These arguments, which the War Office could only
meet with moral appeals that were strictly irrelevant, disposed
of any idea that the nationalization of the armament industry
could be carried through in October 1914 by mutual consent. It
was not till the Ministry of Munitions was established in June
of the following year and powers of control had been obtained
under a special Act, that the profits of the armament firms were
determined otherwise than by the laws of supply and demand,
modified by their own inclinations towards sobriety.

During the first period, which may roughly be defined as the
first twelve months of the war, the problem was primarily that of
obtaining supplies for the Forces regardless of price. This in itself
was by no means a simple problem. It soon became evident that
supplies were lacking, first, because only those familiar with Army
requirements were invited to tender, or if invited were able or

THE PROBLEM OF WAR ORGANIZATION 263

willing to do so ; secondly, because manufacturers were either full
up with private orders, or, with large private orders on their
books, were unable to offer their whole output; and thirdly,
because in certain items the requirements outran the productive
capacity of the industry to meet them. In nearly every case delays
inherent in the purchasing machinery of the War Office aggravated
the difficulties; and the confusion and dislocation caused by
speculation, by competitive buying on the part of local commands
and Allied delegates, and by uncertainties about supplies of raw
material, the need of the Army for men and the probable require-
ments of the War Office, rendered some more systematic form of
organization essential, if the Government was to count on being
able to obtain what it wanted. This stage is marked by negotia-
tions’ with representative Associations or Committees able to
speak on behalf of a whole industry, and the substitution of collec-
tive agreements covering a long period and a wide area of pro-
duction for the previous system of piece-meal demands, individual
tenders, and frenzied speculation.

The next stage in the problem was marked by the growing
importance attached to the question of price. Hitherto with
minor exceptions the prices paid by the Government had been
those that any large buyer would have had to pay; they were
determined by market forces and on the whole were neither more
nor less than private individuals had to pay for similar goods. As
a result, however, of Parliamentary criticism of Government
extravagance, but without any express sanction from Parliament
(which at that time was even more opposed to measures of State
interference than the Government itself), attempts were made by
voluntary agreement to base prices on cost of production and a
reasonable profit. Later this principle, known as the ‘costings
system ’, was embodied in Regulation 7 and 2.8 of the Defence of
the Realm Regulations (see Chapter V), and it became the accepted
doctrine that Government Departments had not merely the right,
but the duty, to purchase supplies at prices bearing no necessary
relation to market prices. The culminating point came when the
right to fix maximum prices was laid down, first by an administra-
tive extension of the right to license dealings, and finally by explicit
mention in Regulations 28 and 2r. Thus the price problem was

264 COMPARATIVE STUDIES

solved in theory and in law by giving the Government power to
fix its own prices. Before the end of the second year of the war
this right had been successfully established, having been applied
by the Ministry of Munitions to certain metals as early as Sep-
tember 1915 and by the War Office to the whole of the domestic
wool clip in June 1916.

During the second year the twin problem of supplies and prices
began to develop more general implications and to cover an ever-
widening range of commodities and processes. The corollary of
limited State interference with market forces was more State
interference ; control and centralized purchase had to be extended
from the finished article back to the raw material. This introduced
further problems. The Government had to devise the best
methods, varying greatly in different trades, for buying raw
materials in foreign markets or for controlling their purchase by
traders. The control of purchase, import and shipment of raw
materials was adopted by the War Office in March 1916 for Russian
flax, in August 1916 for jute, and in May 1916 for kips. In the
meantime the decision to requisition the domestic wool clip in
June 1916 raised a new set of problems relating to the treatment of
the farmer and the purchase of agricultural produce at fixed prices
from hundreds of thousands of individual growers. The State had
now to become wholesale collecting merchant as well as wholesale
distributing merchant.

In the third year of the war a change of Government occurred,
which reflected and emphasized the growing changes that were
taking place in the economic situation. The shortage first of
finance, and then of tonnage, became increasingly stringent
towards the end of 1916 and the beginning of 1917, and signs of
actual world shortage were becoming pronounced in certain
essential raw materials. All three reasons added weight to the |
general considerations which by that time were beginning to
favour control of raw materials. The War Office accordingly
carried through negotiations for the purchase of the whole of the
Australian and New Zealand wool clips. The vast scale of the
Government’s operations in the woollen industry now brought to
the fore two problems which had not hitherto needed any special
attention : the maintenance of the export trade and the provision

THE PROBLEM OF WAR ORGANIZATION 265

of necessary supplies for the civilian population. The first was of
importance owing to the difficulties of the financial situation and
the need of obtaining foreign currency to pay for essential imports.
But after the United States had joined the Allies exchange
difficulties ceased to be so pressing a problem, and other considera-
tions, principally the shortage of tonnage and the need for con-
serving raw materials for military and essential civilian needs,
rendered the maintenance of the export trade of secondary
importance in the system of war economy. The provision of
supplies for the civilian population, however, rapidly became from
January 1917 onwards one of the most difficult and complex
problems of the whole war organization, and it was in the adminis-
trative experiments designed to supply the necessaries of life for
civilians and to ensure their fair distribution at controlled prices
that Government control during the war approached nearest to
the programme of State Socialism. The year 1917 also marked the
most critical point in the man-power problem. A Director-General
of National Service was appointed to facilitate the release of men
for the Army, to restrict employment in non-essential trades and
industries, and to secure the transfer of labour where it was most
required. Finally, towards the end of 1917, the necessity of
rendering greater assistance to the Allies both in tonnage and
supplies led to the imposition of further restrictions on civilian
consumption, to the establishment of a common programme of
imports for all the Allies, and to the gradual recognition of the
principle of equality of sacrifice and the pooling of resources.

In order to obtain a general view of the subject it may
be well to summarize the problems of war organization as they
appeared to an observer earlyin 1917. The substance of thefollow-
ing analysis is taken from memoranda written in the third year of
the war when the necessity for industrial organization and control
had already been accepted, but its full implications had not yet
been realized in practice. They were written when economy of
finance was as important as economy of tonnage.

The economic functions of a nation at war, as seen from the
angle of the War Office, could be stated as follows :

1. To release all men of military age and fitness for service

in the Army.

266 ~. COMPARATIVE STUDIES

2. To clothe, feed, and equip the military forces.

3. To clothe, feed, equip, and house the industrial army at
home.

4. To purchase and import from other nations the essential
food, raw materials and finished articles which could
not be produced by the industrial army at home.

5. To sell and export to other nations any commodities or
services which were not required for military or indus-
trial purposes and which they would accept in payment
for the above.

Labour and capital employed in any of these economic activities
were engaged in essential services; where they were employed
otherwise, they were being wasted. To the extent to which labour
and capital was not employed in essential services, the nation’s
war effort was being weakened. If victory was to be attained,
the greatest possible effort was necessary and the whole economic
resources of the country had to be mobilized for the sole object
of prosecuting the war.

In order to achieve this end, measures were necessary to ensure

the following :

1. Economy of Man Power.

(a) Replacement of men released for the army by men unfit
for military service or over military age, and by women.

(b) Prohibition or restriction of employment in non- essential
or less essential occupations, viz. in luxury trades for domestic
consumption.

(c) Transfer of labour from non-essential to essential pro-
duction by voluntary or if necessary compulsory means.

2. Economy of Finance.

(a) Prohibition or restriction of raising capital or borrowing
for non-essential or less essential purposes.

(b) Prohibition of export of capital and import of securities.

(c) Control of foreign exchange with a view to financing
only essential imports.

(d) Stabilization of prices, profits, and wages so as to check
inflation, avoid industrial unrest and wage disputes, and discourage
expenditure on luxuries and non-essentials.

(e) All surplus profits and unearned increment to be appro-

THE PROBLEM OF WAR ORGANIZATION — 267

priated for expenditure on essential services either by State
monopoly, by taxation, or by voluntary and if necessary com-
pulsory loans.

3. Economy of transport.

(a) Centralized control of maritime transport.

(b) Restriction of imports to military requirements and
essential civilian needs.

(c) Restriction of movement of goods and persons by rail
with priority for essential purposes.

(d) Organized distribution by ‘ zone’ system of food, raw
materials, and other essential requirements so as to reduce railway
carriage to a minimum and eliminate cross hauling.

(ce) Essential commodities to be carried free on Government
account, estimated costs of transport being averaged and pooled
for each industry or trade.

4, Economy of Production.

(a) Centralized control and. distribution of raw materials
for essential purposes by Government Department or Controlled
Association of Traders.

(b) Control of each of the principal industries to be vested in
Councils representing Government, owners, managers, and workers.

(c) Programme of production for each industry in following
order of priority :

(i) British and Allied military and naval requirements at
controlled prices.

(ii) Minimum essential requirements for civilian con-
sumption at controlled prices.

(iii) Balance available, including luxury articles, for export
at highest prices obtainable.

(d) Centralized management of industry so as to secure the
most economical division of labour between factories, having
regard to raw materials, transport and labour available ; the most
efficient and convenient plants being run full time and the less
efficient and convenient being closed down.

(e) Pooling of costs of production and profits in each
industry so as to secure equality of sacrifice and to keep all
factories in efficient working order and available for production
when required. :

268 COMPARATIVE STUDIES

(f) Pooling of trade secrets and technical knowledge of
special processes, and training of workers and managers in up-to-
date methods of production.

(g) Examination of quality and costs of products, and
publication of results in comparative form so as to encourage
competition and esprit de corps among producers.

5. Economy of consumption.

(a2) Endeavours to be made to cut down superfluous con-
sumption and waste in the Army by reducing unnecessarily heavy
rations, by accepting substitutes for less important articles of
equipment, and by collection and repair of cast-off and damaged
clothing and equipment.

(b) Organized distribution and if necessary rationing of
essential civilian requirements, viz. food, clothing, and household
necessaries at fixed prices.

(c) Prohibition of sale and purchase of articles of luxury,
and sumptuary regulations.

(d) Restriction of civilian consumption of light, fuel, and
petrol.

(e) ‘ Stretching ’ of bread and production of economical food
substitutes.

(f) Elimination of waste and regulations limiting consump-
tion by animals of articles fit for human food.

The above programme was never of course completely realized
even in the latest stages of the war, not so much because the
proposals were not desirable on strictly military grounds, but
because their introduction and application on anything like
a universal and wholesale scale was politically and psychologically
impossible. Each measure of drastic State interference had to
be preceded by some disaster or some immediately impending
danger, before the psychological conditions were ripe for ‘its
introduction and successful enforcement. Neither the Govern-
ment, nor traders, nor public opinion wanted more State inter-
ference than was absolutely necessary. Consequently the neces-
sary adjustments and reorganizations were put off to the very last
moment, generally so late as to increase the inherent difficulties
and to magnify the risk of breakdown. But, as is shown in the case
of rationing, such delays had their comperisating advantages in

THE PROBLEM OF WAR ORGANIZATION 269

the immense simplification which a thorough psychological pre-
paration for State interference brought about.

But though the comprehensive programme sketched above
was never fully realized, nearly all the principles laid down
influenced policy in some sphere or other, in varying degrees and
with varying success. An attempt will be made in the next
chapter to show to what extent they were applicable and how
far they were actually applied in two of the industries controlled
by the War Office.

CHAPTER XXII
ORGANIZATION OF INDUSTRY

Crisis in 1917 — Review of situation by Army Contracts Department — Man-
power, production, export trade, consumption — Measures already taken
inadequate — Need for treating each industry as a unit — Illustration from
woollen and worsted industries — Man Power and Production Committees —
Constitution and functions — Advantages of joint control — Promotion of
export — Exporters Committee — Restriction of imports — Centralized pur-
chase of raw material — Importers Committee — Division of functions between
Departments.

In the early months of 1917 the situation of the Allied cause
was more critical than it ever was before or since. The intensive
submarine campaign was at its height. Ships were being sunk
at a rate which would have brought about a surrender to the
enemy within a few months, or even within a few weeks if
several wheat and other food cargoes had been sunk in quick
succession. The United States had not yet entered the war and
the difficulties of financing purchases in North and South America
were rapidly cutting off supplies even where tonnage was available.
The need for reinforcements was becoming ever more insistent
and all men of military age and fitness who could possibly be spared
were being combed out by the new Department of National
Service. The policy of conscripting labour to fill the gaps left by
men taken for the front was being seriously considered and was
gradually being introduced bit by bit and in indirect ways. A
Food Controller had been appointed and was known to be con-
sidering plans for compulsory rationing.

A general review of the situation made by the Army Contracts
Department at this time drew attention to the need for the exten-
sion and better co-ordination of the various measures of control
exercised by different Government Departments, and urged that
the right line of advance was to treat each industry as a unit in
dealing with the closely related problems of man-power, trade and
production. The problems raised in this survey of the situation
cover a good part of the general programme sketched in the last

ORGANIZATION OF INDUSTRY | 271

chapter, the illustrations being taken from the woollen and worsted
industries. The main objects to be aimed at were considered under
four heads: (1) economy of man power, (2) maximum produc-
tion, first for military purposes and secondly for export, (3) en-
couragement of export trade, (4) restriction of domestic con-
sumption and of superfluous imports. The steps already taken to
achieve these ends were indicated and suggestions were made for
applying similar measures with necessary modifications to all
industries.

The steps taken to achieve the above ends were shown to be
insufficient.

1. The Army was still not getting the number of men required
and large numbers of potential recruits were still retained in
industry owing to the impossibility of replacing them. Replace-
ment of men released for the Army had hitherto been effected,
outside the munition industries proper, in an imperfect and hap-
hazard manner by the attraction of higher wages and the con-
flicting efforts of individual firms competing with one another.
The decision as to what labour could be released for the Army
rested partly with the Local Tribunals, partly with the Central
Man Power Board, and partly with the Government Department
chiefly concerned in the control of the industry. These different
authorities, being guided by varying considerations, were apt to
conflict with one another and cause friction and uncertainty in
the industry. The problem of finding substitutes for men released
was also being tackled by the military authorities under the new
Substitution Scheme, whereby men of military age but of low
military category were being released from the Army to take the
place of men called up. This scheme however did not extend to
women or to men over military age, and was weakened by the fact
that the men so released were under no legal obligation to continue
in the employment found for them.

Scarcely any attempt had yet been made to cut down the
employment of labour for non-essential purposes. A beginning
had indeed been made by prohibiting certain scheduled trades
from taking on fresh labour, but the Government had not yet
gone so far as to prohibit the performance of non-essential services
and the manufacture of superfluous luxuries, except on other

202 COMPARATIVE STUDIES

grounds such as consumption of valuable raw materials. Lastly,
no organized system had been generally adopted for the transfer of
labour from non-essential to essential production, except in the
engineering trades under the Ministry of Munitions Act and by
the establishment of War Munitions Volunteers.

2. Maximum production for the British and Allied forces was
being obtained by compulsory requisitioning of output and control
of raw materials. But no corresponding steps had been taken
to secure priority for the demands of the export trade over
unnecessary demands for home consumption.

3. No systematic attempt had been made to increase the
volume of the export trade, to open up new markets, and to divert
’ surplus production into export channels by deliberate organization
of trade and industry for that purpose.

4, A system of control already existed for restricting imports
of unnecessary articles, but many goods were still being imported
in excessive quantities for civilian consumption.

All four problems, Man Power, Production, Export, and Import,
were closely connected and could only be profitably dealt with by
taking each industry or group of industries as a unit and consider-
ing the problem as a whole. To achieve any results State action
was bound to interfere with normal trade conditions and for that
reason it was essential to have the closest co-operation between
all interests, viz. manufacturers, employees, merchants, and
representatives of the Departments principally concerned. An
illustration of the manner in which the whole problem might be
dealt with on these lines was afforded by the steps already. taken
in the woollen and worsted industries.

Application to Woollen and Worsted Industries

In the woollen and worsted industries Government control had
been established to secure a very large output of clothing for the
British and Allied armies at the cheapest cost. Recently, how-
ever, it had become necessary to pay increasing attention to the
release of woollen and worsted operatives for the Army, to the
transfer of workers from civilian to military, or from non-essential
to essential processes, to the encouragement of the export trade,
and to the control of supplies for home consumption both in

ORGANIZATION OF INDUSTRY 2713

regard to quantity and price. The experience gained showed
that the best means of achieving these ends was to establish
Committees representing the Government, the employees, and
the employers. Committees of this kind, called Man Power and
Production Committees, had been set up in Bradford for the
worsted industry and the woollen industry, in Manchester for the
flannel industry, in Glasgow for the Scottish woollen and hosiery
industry, and in Leicester for the Midland hosiery industry.

The composition and functions of these local Committees on
Man Power and Production are described in the official memor-
andum as follows :

These Committees consist in each case of four representatives of the
employers and four trade unionists, with local officers of the Recruiting
Department and of the Contracts Department of the War Office. In the
case of the two Bradford Committees, the chief Substitution Officer for
the district, who is responsible to the Inspector of Recruiting (Northern
Command), is Chairman; a local Officer of the Contracts Department is
Secretary; and other officers of the two Departments attend as and when
required.

The procedure of the Worsted Committee may be taken as typical.

(1) The first step taken by the Committee was to obtain a detailed
census of labour, machinery, and output in the whole of the
Worsted Industry. This census showed the number of men and
women employed in each firm on each of some fifty or more
processes, the number and age-groups of men of military age
and their medical categories.

(2) With the aid of the census, the Committee has laid down a scale
showing the minimum number of men required for each pro-
cess in proportion to the weekly output for essential purposes.
This has been applied as a test to each firm in the industry with
a view to the immediate release of all surplus men of military age.

(3) Each firm in the industry has supplied a list of all the men of
military age who can be released if substitutes are available.
Further, in order to procure substitutes, particulars have been
supplied by all firms of all skilled men who have been at any
time in their employ and who are serving in the Army at home.
In addition the Recruiting Authorities have compiled lists of
all available substitutes—skilled and unskilled—whether already
called up and in the Army, or unfit for general service, or waiting
to be called up.

(4) Separate Sub-Committees composed of at least one employer and
one trade unionist have been appointed for each branch of the
trade, and these Committees assist the Recruiting and Sub-

1569.53 T

274 COMPARATIVE STUDIES

stitution Officers in selecting men from the substitutes list for
particular jobs.

(5) The Committee acts through the Trade Union concerned in trans-
ferring skilled men from firms employed on non-essential work
to firms who are short of labour for essential production, viz.
Government or export orders.

(6) Acting through the Employment Department of the Board of
Trade, the Committee is encouraging the introduction of women
workers from other districts for the purpose of utilizing them
in factories engaged mainly on Government work.

(7) The census of machinery enables the representatives of each
branch of industry to advise the Contracts Department on the
distribution of Government orders. If a firm does not volun-
tarily undertake its fair share of Government work (which in
present circumstances is much less profitable than the home or
export trade), compulsory steps are taken to requisition its
output.

(8) In a similar manner the Committee will assist the Department to
deal with any difficulties that may arise in connexion with the
scheme for stimulating the export trade by means of export
Priority Certificates. The Committee will assist the Department
to bring pressure to bear on firms who are not doing their fair
share of export work.

The chief advantage obtained by means of these local Com-
mittees on Man Power and Production was that the different
interests concerned were able to meet for discussion of their various
points of view instead of looking upon one another with suspicion
and even openly fighting one another. Representatives of the
Recruiting and Contracts Department were compelled to meet
each other half-way and attempt to reconcile the conflicting
interests of recruiting on the one hand and production for military
purposes on the other. Similarly employers and employed were
brought together to settle questions on which their interests were
to some extent, but not altogether, divergent. But even more
important was the close co-operation between the Government
and the trade which such Committees rendered possible. Instead
of leaving problems of release, substitution and transfer of labour
to be settled by the strongest pull in a perpetual tug-of-war,
a considered attempt was made to weigh possibilities and devise
ways and means for a satisfactory solution by the aid of detailed
statistics and a practical knowledge of the technicalities of the

ORGANIZATION OF INDUSTRY 215

industry. The results achieved were such as to justify the policy.
In the worsted trade the demands of the Recruiting Depart-
ment for the release of several hundred additional men were met
without impairing production. Women were gradually introduced
to do work which had hitherto been done by men, and substi-
tutes adapted for particular jobs were provided by the military
authorities without causing friction with organized labour.
Moreover, the trade unions themselves undertook the responsi-
bility of transferring labour to the firms where their employment
would be most valuable in the national interest. The presence
of employers and employed on the same Committees created
a healthy rivalry in subordinating private interests to urgent
national interests.

It should be observed that in the woollen and worsted
trades, as also in the leather trades, the control of labour and
machinery was completed by the fact that the War Office con-
trolled the whole of the raw material. Strong pressure could
thereby be brought to bear to diminish production for superfluous
domestic needs and to encourage the export trade. Firms were
aware that unless they took their fair share of Government work
and export orders, they would not only have their labour taken
from them but would run the risk of being starved of raw material.
These conditions did not exist in other industries. It was sug-
gested, however, that in trades where no Government Department
controlled raw materials to the same extent, similar pressure
might be brought to bear by restricting the import of raw materials
and attaching conditions to the use of any material allowed to
be imported.

Promotion of export trade

It was not sufficient, however, merely to give priority of labour
and raw materials to the export trade. It was necessary also to
find buyers in the countries where, for reasons of national finance,
increased export was of vital importance at that time. These
countries were particularly North and South America, but export
to other neutral countries, e. g. China and ora indirectly had
their effect on the exchange.

For this purpose steps were taken "9 organize the large

T 2

276 COMPARATIVE STUDIES

exporting merchants in the woollen, worsted, and clothing trades.
A representative Exporters Committee was set up whose duty it
was to co-ordinate efforts to find new markets and to adjust
selling prices so as to get the maximum return in foreign exchange
from those markets. Moreover, in order to provide a solid founda-
tion for the extension of export business, the War Office decided
to standardize over a period the prices at which Government
controlled materials would be supplied for the export trade. It
was also the duty of the Exporters Committee to advise the Com-
mittee on Man Power and Production with regard to the issue of
certificates giving priority to export orders. Similarly in the
boot and leather industries, the Leather Control Committee, which
was set up to advise the War Office in controlling the purchase
and distribution of raw materials in the leather trades, helped to
stimulate the export trade by granting preference in the release
of raw materials for export work as against work for the home
markets. Both the Wholesale Clothiers Association and the
Federation of Boot Manufacturers made arrangements for sending
out travellers on behalf of their trades as a whole to exploit
new markets in North and South America.

The memorandum continues as follows :

As the shortage of tonnage grows more acute and the difficulties of
financing the purchase of munitions and foodstuffs in America increase,
a more drastic treatment of the import problem becomes of vital impor-
tance. A distinction may be drawn between the import of manufactured
articles and the import of raw materials and semi-manufactured articles.
The former eat into our limited financial resources but do not involve
unnecessary employment of labour except in the services of transport and
distribution. The latter, however, involve the utilization of labour for
the subsequent stages of manufacture, and in so far as the product is not
re-exported or delivered against Government orders, drastic restriction is
necessary. Where the import of manufactured articles is prohibited
control is necessary to ensure that the demand is not met by non-essential
production at home. This may be achieved either by deliberate prohibition
of manufacture or by compulsory withdrawal of labour, both of which
measures would best be enforced by local Committees on Man Power and
Production. Where restriction of import is applied to raw materials and
semi-manufactured articles, part of which is required for essential pro-
duction and part for non-essential production, steps must be taken to
control distribution and prevent the materials being diverted into un-
necessary channels of manufacture. Reference has already been made to

ORGANIZATION OF INDUSTRY at

the control exercised in this respect in the woollen and worsted industries
by direct Government purchase and sale of the raw material. A similar
monopoly exists in the case of imported flax and flax seed and certain
kinds of hides and tanning materials. Centralized purchase and sale
renders it possible to ration the trade and to fix prices in such a way as
to secure preference for Government and export work over the require-
ments of home trade. The mere restriction of imports and licences tends
to encourage artificial inflation of prices and even to illegitimate trafficking
in licences. Where no Government Department can undertake centralized
purchase it may therefore be necessary to set up some other machinery
for controlling distribution in the national interest.

The most practicable course would appear to be to entrust the sole
right of purchasing each raw material to a single Association or group of
importers. The importers’ Committee of Control would license all pur-
chases and sales and allot to each importer their proportion of the total
business. In consultation with the Board of Trade or other Government
Department chiefly concerned, they would settle the minimum quantities
necessary for maintaining production for essential purposes and for this
purpose would have the right of calling for compulsory returns of produc-
tive capacity, stock in existence, and normal rate of consumption. The
profits of individual importers would be limited to a fixed rate of com-
mission, and any surplus profits obtained from the higher prices due to
restriction of import would be for Government account. Arrangements
of this kind have been made from time to time with the Tanners Federation
for the import of hides and tanning materials, and proposals are now being
considered for applying the same principle to the import of raw jute. The
co-ordination of import policy as between different commodities and
between the requirements of the various Government Departments would
rest with the new Inter-Departmental Committee on Restriction of
Imports which it is proposed to set up. It is clearly essential for the
maintenance of our export trade that manufacturers should be certain
of receiving sufficient supplies of raw materials at reasonable prices, and
it will therefore be one of the most important functions of the proposed
Inter-Departmental Committee to safeguard the limited quantities of raw
materials which can be imported against unnecessary inflation of price
and diversion into non-essential channels of manufacture.

It is now possible to suggest in broad outline the means by which the
main objects of industrial organization for war purposes may be achieved.
If swift and vigorous action is to be taken in dealing with the many complex
problems involved it would seem to be essential :

(i) That each main industry or group of industries should be dealt
with ad hoc.

(ii) That the responsibility of supervising the organization of each

industry on behalf of the Government should rest with the
Government Department chiefly concerned in each case. So

278 COMPARATIVE STUDIES

long as the connected problems of Man Power and Production,
Import and Export, in the same trade are dealt with by several
different authorities responsible to different Government
Departments, divided counsels and inefficiency are bound to
result.

(iii) That compulsory powers for increasing or restricting productien
should be exercised through a small responsible Committee of
the trade, representing employers and employed.

(iv) That the encouragement of export and the control of imported
raw material should be entrusted to Committees of exporters
and importers acting in consultation with and under the super-
vision of the Government Department chiefly concerned.

(v) That while the details of organization must be left to the cir-
cumstances of each industry, the general lines of policy should
be co-ordinated by an Inter-Departmental Committee fully
representative of the more important branches of Government
policy, e.g. :

) The need of men for the Army.

) The difficulties of the shipping problem.

) The financial situation.

d) The production of military requirements.

e) The maintenance of food supplies and essential civilian require-

ments.

It was proposed that the division of functions between the
different controlling Departments should continue as_ before.
The Ministry of Munitions would be responsible for the engineering
and munitions industries and the War Office for the textile and
leather industries; the Boards of Agriculture and the Food
Controller would control agriculture and the food trades; and
the Board of Trade would exercise general control over the
supply of essential civilian requirements, and the cutting down
of non-essential production in those trades with which neither of
the other Departments was in direct touch.

It will be seen that the chief thought running through this
general survey is the need for greater co-ordination. Early in 1917
control was being rapidly extended in every direction, but there was
no comprehensive policy to guide the activities of the controlling
Departments. Gradually during the next eighteen months this
deficiency was made good; but the absence of an Economic
General Staff to plan and co-ordinate all the multifarious aspects
of Government control was felt until the end of the war. Some

ORGANIZATION OF INDUSTRY 279

of the functions of such a body were exercised by the War Priorities
Committee of the Cabinet, which determined the relative claims
of rival Departments for men and materials at home; but since
shipping was from 1917 onwards the chief limiting factor in the
supply of materials, the Ministry of Shipping and the Allied
Maritime Transport Council became in fact the ultimate arbiters.
The result was that the touchstone applied to every form of
economic activity was its importance from the tonnage point of
view, which did not necessarily correspond with the more general
standpoint of the maximum economic efficiency. Many things
were done or left undone which were of no importance to the
Ministry of Shipping and yet had a vital bearing on the national
war effort.

One of these questions was the importance to be attached to
the export trade. The volume of goods exported during the war
was necessarily restricted, partly owing to the vast scale of military
requirements and partly in order to prevent supplies going to
enemy countries. But prohibition and restriction of exports
were often unsatisfactory. Restrictions were imposed with the
object of checking competition by foreign buyers; but their
effect went beyond the immediate object of safeguarding supplies
for essential purposes and encouraged a larger consumption of
unessential commodities by the civilian population. By a more
systematic organization of trade and industry essential supplies
might have been safeguarded and their prices controlled without
checking the export of the unessential surplus. Indeed, as the
experience of the export priority scheme in the woollen and worsted
industries showed, it was possible to go further than this and
provide a special stimulus for the export trade, so long as there
was any surplus available for export. But the chief reason for
promoting export disappeared when the United States entered the
war and undertook to provide unlimited dollar credits ; and with
the severe restriction on the import of raw materials that followed
most industries ceased to have any large surplus of goods to
export. It is probably true, however, that in certain industries,
such as cotton for example, restrictions on domestic consumption
of cotton goods and deliberate promotion of export would still
have been a feasible policy worth pursuing if the sole consideration

280 COMPARATIVE STUDIES

had been the maximum war effort. As it was, high wages and
high profits actually stimulated the home consumption of cotton
goods above the average.

In other respects the organization of industry, outside muni-
tions industries, made important advances during 1917 and 1918.
The formation of representative bodies, to advise and co-operate
in the administration of control, has been mentioned as an essential
feature in nearly every scheme touched on in previous chapters.
Of special interest are the Wool Control Board, the Leather
Council, and the Flax Control Board. In each case three parties
were represented—the Government, the employers, and the
workers, and through them the administration of control became
more and more a matter of responsible self-government. The
method of conference and deliberation replaced the earlier pro-
cesses of bargaining, and State control became less intolerable
when elected representatives of employers and workers were
invited by the Government to take their share in the adminis-
tration of control.

But the most important development during the last year
of the war was the extension of the method of conference and co-
operation on an international scale. The initiative in this sphere
was taken by the Allied Maritime Transport Council, which found
it essential to have the demands for tonnage made by competing
industries in the different Allied countries sifted and reduced to
an agreed figure by direct negotiation between the Allied interests
concerned. For this purpose Inter-Allied Programme Committees
were formed in Wool, Leather, Jute, Hemp and Flax, and Inter-
Alhed Executives or joint-buying organizations in cereals, oilseeds,
meat, and other commodities.

Though negotiations on these bodies were in the hands of
Government representatives, representatives of the trades and
industries were sometimes invited as assessors, and at two meet-
ings of the Inter-Allied Oilseeds Executive in Paris delegates
from every section of the industry—soap manufacturers, margarine
manufacturers, crushers, brokers, and merchants—took part in
the discussions and contributed to the formulation of a joint policy
covering the imports and exports of half the world and the
industries of three countries.

ORGANIZATION OF INDUSTRY 281

The aims and structure of the various war-time organizations
thus came to bear a certain similarity over a fairly wide range.
The unifying influences were, firstly, the necessity for co-ordination
between different industries and branches of industry faced with
the same problems; secondly, the scarcity of tonnage and the need
for apportioning its incidence by agreement and mutual concession ;
and thirdly, the movement towards more decentralization and
sharing of responsibility in the administration of control.

CHAPTER XXIII
THE MECHANISM AND THEORY OF PRICE FIXING

The novelty of price control — Growth of an idea — Price control for military
purposes — The methods of the ring adapted for public ends — Price fixing for
civilian consumption more difficult — War-time boots and standard clothing —
Standardization and identification by marks — Resemblance to sale of pro-
prietary articles — Control of supply, licensing, and rationing of demand — How
far were maximum prices observed ?

Theoretical objections to price fixing — Effects on production and con-
sumption — Price fixing used either to discourage or to encourage production
according to plan — Guaranteed prices for farmers — Reduction of consumption
by rationing rather than by destitution — Effect on prices and consumption of
non-rationed articles — Continual extension of control — The right balance
of prices — Diversion and transference of purchasing power — Price control
and inflation — Was inflation inevitable ? — Price-control and rationing an
alternative.

Berore the war, apart from certain statutory regulations
limiting the prices to be charged by public utility companies,
State control of prices was unknown and, for the most part,
unthinkable. Maximum prices, ‘fair’ prices and penalties for
profiteering and forestalling were classed among the economic
heresies of the dark ages before Adam Smith had proclaimed
the gospel of modern commerce. Even Socialists stopped
short at suggesting Government regulation of prices, so long
as the means of production and exchange remained in private
hands. The idea that in the twentieth century laws could be
passed and enforced, prohibiting private traders from buying or
selling articles of food or clothing at more than prescribed prices,
would have been regarded as too paradoxical even for Mr. Shaw
or Mr. Chesterton. Mr. Wells, indeed, had prophesied that the
next war would be fought with aeroplanes and tanks, but even
he had not foreseen the régime of food-cards and maximum
prices with which belligerent Governments would afflict long-
suffering grocers and housewives. When early in the war the
Workers War Emergency Committee demanded that the Govern-
ment should commandeer all foodstuffs and divide them up

equally, their proposal sounded actually less fantastic than the

MECHANISM AND THEORY OF PRICE FIXING 283

notion that tens of thousands of private traders should be told
what and when to buy, to whom they should sell, and what price
they should pay and receive.

At a later stage in the war public opinion had become so
familiar with this system of price control that unthinking critics
of the Government expected it to abolish profiteering at a stroke
by the mere process of ‘ fixing prices ’.

Here we have the elements of an interesting sociological study
—the birth or rather re-birth of a revolutionary idea, its reception
amid almost universal scepticism and derision, its gradual accep-
tance by practical men as the result of cautious experiment and
the elaboration of a complex technique, its apotheosis by the
myth-making multitude as an infallible panacea, and its subse-
quent collapse and discredit amid general unpopularity when the
immediate occasion for its usefulness had passed. It is a curious
commentary on what used to be regarded as the * eternal ’ truths
of economic science that this heretical doctrine had a greater
vogue and more important practical consequences during its
short term of existence than many of the abstract generalizations
which are supposed to be true for all time but are never strictly
applicable except in a hypothetical world.

This chapter is concerned with the development of a technique
for enforcing price control, and the conditions which determined
success or failure. An attempt will also be made to estimate the
general validity of price control as a war policy and its relation
to other war phenomena such as inflation, restriction of consump-
tion, and stimulation of production.

The first attempt to get away from the normal adjustment of
prices by competitive tendering and the higgling of the market
was by entering into collective agreements with associations of
traders. The significance of the early negotiations with the Whole-
sale Clothiers Federation, with the President of the Boot Manu-
facturers Association, and with the United Tanners Federation
becomes evident from every succeeding chapter. The essence of
price control, at the end of the war as at the beginning, was the
substitution of organized co-operation for competition. Voluntary
agreements, however, were not enough. The next steps were the
exercise of compulsory powers of requisitioning, and the invention

284 COMPARATIVE STUDIES

of a legal doctrine, ultimately resting upon an antiquated notion of
the Royal Prerogative, that the Government was not compelled
to pay the market price for goods required for military purposes.
With the invention of the costings system, under which the Govern-
ment obtained its own raw or subsidiary materials and handed
them to a manufacturer to be worked up for an agreed margin or
conversion cost, goods for military purposes could be obtained
at prices independent of ordinary market prices in this country
and determined only by prices ruling in world markets for the
raw produce. Later, with the growing stringency of tonnage and
finance, even the world market ceased to have any meaning, and
by centralized purchases in bulk at the cheapest source of supply,
the Government was able to obtain its own raw materials such as
wool, kips, and hides at lower prices than other countries were
compelled to pay for the balance obtainable elsewhere.

The problem of controlling prices for military goods was thus
solved by buying at the source and limiting profits at inter-
mediate stages up to the finished article. In a sense there was no
price problem when the Government was supplying its own needs ;
it merely bought the raw materials as cheaply as possible and
treated manufacturers and merchants as agents performing certain
services. Even in this field, however, other methods were some-
times employed, which emphasize the importance of trade
associations. The Government needed British hides for harness
and equipment and for the soles of Army boots; but it did not
need them all. It therefore agreed on a basis of prices with the
United Tanners Federation, which undertook (provided export
was prohibited, thus cutting off every alternative outlet) to induce
its members not to pay more than a fixed price to butchers. The
methods of the ‘ ring’, which had in the past been used to keep
up prices against the Government, were now used to keep them
down in the Government’s favour. Provided the members of the
group loyally observed their undertaking, the price fixing of the
‘ring ’ was as effective as centralized State purchase in controlling
prices. Agricultural producers in all countries are beginning to
realize that this is true, to a less extent but enough to cause
disquieting suspicions, in peace as well as in war. During the war,
moreover, the ‘ring’ worked in the open under the supervision

MECHANISM AND THEORY OF PRICE FIXING 285

and sometimes with the statutory authority of the Government.
In peace farmers complain that they work in secret, that they
consult neither the Government nor themselves as to the price
to be paid, and that they are more active in preventing a rise than
in stopping a slump. Price fixing by agreement between buyers,
which was the key to price fixing by Government regulation, is
familiar enough at all times. There is no mystery and little
novelty in maximum prices so determined.

A maximum buying price, however, enforced by a monopolist
or group, is essentially different from a maximum selling price
enforced upon a third party. Granted that commodities could
be bought and sold by the Government or by an association of
traders at fixed prices, the problem still remained of ensuring that
dealers at intermediate stages and ultimately retail traders
charged no more than a reasonable price allowing a fair margin of
profit. This problem only arose under the War Office, so far as
it was concerned with supplies sold for civilian consumption.
Until the third year of the war few attempts were made to control
prices for the benefit of the civilian consumer. Manufacturers of
jute goods, woollen and worsted goods, boots, ropes, linen, and
leather, were allowed complete freedom to charge what price they
could get to merchants, exporters, and domestic consumers.
Consequently the Government, in releasing raw materials such
as wool, flax, or hides for civilian consumption, charged the market
price and made substantial profits. To have sold these raw
materials at less than market price, without establishing complete
control down to the retail shop, would have merely meant making
a present to some dealer or manufacturer at one stage of the
process of transformation into the finished article. Artificial
reduction of the price of raw material, like similar action in con-
trolling rates of freight, would not by itself have cheapened the
price of the finished article. Price fixing breaks down if at any
stage there is a free market between buyer and seller. To make
the chain complete it was evident that the principle of the fixed
margin, or payment for services rendered, would have to be
enforced from beginning to end. It was not the business of the
War Office to attempt any such task.

In two important cases, however, an exception was made.

286 COMPARATIVE STUDIES

The War Time Boot Scheme and the Standard Clothing Scheme
were offshoots of War Office control of the wool textile and leather
industries. In each case a process of costing, similar to that in
force for military requirements, was applied to a certain propor-
tion of the civilian output. The War Office released raw
material on condition that the prices charged by the manufacturer,
the wholesale distributor, and the retail trader, did not exceed
a fixed schedule; and, to facilitate enforcement, every article so
made was marked with the Government price which might not be
exceeded. The essential features of both schemes were standardi-
zation of quality and identification by marks. In the case of
boots, the Government mark, including the price, was stamped
on the sole; standard cloth was given a selvedge of red,
white, and blue. In neither case were standardization and fixed
prices applied to the whole output of the industry ; fancy goods
and goods for export always remained free. Nor was there any
systematic attempt to ration the standard goods produced. The
technique of price fixing resembled the control exercised over
retail traders by manufacturers of proprietary articles, by the
Imperial Tobacco Company, or by a large concern like the Shell
Company over its agents and retail purveyors. A tin of petrol, an
ounce of tobacco, and a patent medicine are sold retail at prices
determined at the source, and incidentally, like war-time boots
and standard cloth, their prices are practically uniform throughout
the country. The sanction in both cases is much the same. A
retailer who sells above or below the fixed price is liable to be cut
off supplies.

Other experiments were made at the War Office and also at
the Ministry of Munitions, which showed that maximum prices
might be enforced in certain cases by a system of licensing. All the
wholesale dealers in some commodity, such as tungsten or wool
noils, might be prohibited from dealing except on terms. Maxi-
mum selling prices could then be enforced as a condition of being
allowed to deal. This was a rough and ready method, but was
useful and effective in cases where the source of supply and the
ultimate demand were controlled by Government purchase or by
some form of rationing according to priority.

When the Ministry of Food was established sufficient experi-

MECHANISM AND THEORY OF PRICE FIXING 287

ence had been gained to point the way to the gigantic enterprise
of controlling the prices of most of the principal foodstuffs. The
essential elements of the plan were (1) centralized purchase or
control of supply at the source, (2) standardization and identifica-
tion of quality, (3) licensing of traders, and (4) some form of ration-
ing or control of demand. It was emphatically not sufficient
merely to issue Maximum Price Orders, however severe the
penalties that might be imposed on infringement. Supporters and
critics alike were apt to regard maximum prices as depending for
their efficacy on magistrates and policemen; one party upheld,
and the other denounced, the policy of trying to suspend the Jaws
of supply and demand by punishing the profiteer. It is not worth
labouring the point that it was not by such methods that prices
were controlled.

It is worth considering, however, how far maximum prices
were in fact observed. Broadly speaking, illicit trade never
reached important dimensions in this country compared with
Germany or Austria, partly because control was more thorough,
partly because supplies were never so low as to impose a severe
strain, and partly because popular opinion, including that of the
trades controlled, accepted control as a necessity and sanctioned
acquiescence as a patriotic duty. If maximum prices had had
to depend for their enforcement merely on Orders of the Food
Controller and on prosecutions in the courts, they would have been
laughed out of existence in a week. But when public opinion
had got accustomed to the idea, prosecutions for trivial technical
offences acquired a deterrent effect altogether out of proportion
to the real importance of the case or the severity of the
punishment. Moreover, it was not so easy to escape detection
when every customer and every rival trader was a potential
witness. In country districts, where the view of the producer
predominated over that of the consumer, it was naturally more
difficult to secure enforcement. Sides of bacon, fresh butter,
and a leg of lamb could be picked up on a farm by a willing buyer
at prices exceeding the legal maximum. No amount of enforce-
ment could prevent such leakages. The surprising thing to those
who worked in London was the loyalty with which even farmers,
the most independent and individualist class of producers,

288 COMPARATIVE STUDIES

accepted and observed most of the edicts of the Food Controller.
A strike of farmers would have brought down the whole edifice of
food control as completely as communism (in the economic sense)
has been smashed by the peasants’ passive resistance in Russia.
But the Food Controller was generally wise enough to see that
the farmer did not actually lose by the prices fixed. Indeed his
policy, in the case of milk and potatoes for example, was intended
as much to stimulate production as to prevent exploitation.

It may be well at this point to consider various objections
advanced against the whole policy of attempting to control prices
during the war. Before the establishment of the Ministry of Food
every one would have agreed that price control was dangerous,
most would have said that it was impossible, and a large number
would have said that it would be worse if it succeeded than if it
failed. The view that even if it was successful, it was inherently
unsound and vicious, even in time of war, is still commonly held.

In support of this position two main grounds are advanced :
first, that it discourages production, and second, that it encourages
or fails to restrict consumption. In regard to the first argument
a distinction is sometimes drawn between industrial and agricul-
tural production. It is argued that limiting the profits of manu-
facturers by price fixing may do no harm provided it is limited to
a short period and the State itself looks after any capital develop-
ments that may be necessary as during the war. But agriculture
is more liable to be upset by State interference. The quickest
way to stimulate a maximum increase in production is to allow
prices to rise to their fullest possible extent. Any interference
with this process will pro tanto check the rate of increase and may
even cause a decrease. The second argument follows similar lines.
The surest way of checking consumption, which is essential in time
of war, is to allow prices to rise faster than wages and salaries,
which represent the largest proportion of the nation’s purchasing
power. To the extent to which consumption is reduced by high
prices, production is set free for military purposes. The Govern-
ment therefore should have obtained its own requirements as it
thought fit, leaving civilian supplies to the uncontrolled play of
market forces. It might be added that if the Government had
taken a larger proportion of the national income by taxation,

MECHANISM AND THEORY OF PRICE FIXING = 289

credit and currency inflation would have been reduced, prices
would not have risen so high as they did, and the rich would have
had to curtail their consumption as well as the wage-earners and
middle classes. The real effect of rationing and maximum prices
according to this argument was to increase consumption, by
placing within reach of all commodities which many would
otherwise have done without or consumed in smaller quantities.
It is even alleged as a fact that the introduction of bread rationing
in some countries led to an immediate increase in consumption.

These objections deserve examination. They may be valid under
certain circumstances and not under others. As regards produc-
tion, the effect was sometimes discouraging, sometimes the re-
verse. For example, a guaranteed fixed price in advance for
potatoes, milk, and wheat, when there was always the risk of a
glut or a slump if the war came to an end, had a directly stimula-
ting effect on production. On the other hand, a low price for butter
and a moderate price for meat discouraged production. But in
these cases there were valid reasons for not stimulating the pro-
duction of butter and the fattening of live stock, owing to the
shortage of tonnage and the lack of fodder; when fodder was
deliberately excluded from the import programme to make room
for munitions, dairy herds and live stock had to be diminished.
Price fixing therefore does not necessarily diminish production
even in agriculture. If the price is fixed beforehand at the time
of sowing and is sufficiently high to cover cost of production and
ensure a certain profit, production of that particular commodity
may be stimulated ; for a guaranteed price and a certain return
may be more attractive than the speculative risks of a free market.
Even when price fixing is deliberately depressing in its effects on
one commodity, such as butter, it may have the negative result
of stimulating the production of another, such as milk or cheese.
Rightly considered therefore and judiciously applied, price fixing
is the instrument for securing the production of the commodities
most required in the general interest; and in time of war the
general interest could within broad limits be interpreted in terms
of a definite economic programme.

On the side of consumption the arguments against price
fixing, subsidies and rationing are perhaps economically sounder

1569.53 U

290 | COMPARATIVE STUDIES

but practically and politically less tenable. Consumption is
reduced by high prices ; but at the expense of the poor, not of the
rich. In times of acute shortage the poor might be altogether
deprived of an essential food. But even short of starvation for
the many, it is politically impossible in time of war to allow the
rich complete freedom to buy what they will. The workers and
their dependants must not only be fed, if they are to work hard,
but they must be kept reasonably contented. Strikes are in-
admissible, but so is coercion. In peace workers can be forced
to submit to a lower standard of living by unemployment, dis-
missals, and lock-outs. In time of war these draconian methods
endanger the nation’s fighting efficiency. The only hope of
reducing consumption is by rationing all alike; there is then
some chance of obtaining consent to substantial reductions. As
for the argument that rationing increases consumption, this was
not true of the articles most severely rationed in Great Britain.
Meat, butter, and cheese were consumed in smaller quantities
during the rationing period. Smaller imports were possible both
of these commodities and of the feeding stuffs necessary to produce
them at home, with the result that tonnage was released for
munitions and troops. Bread was never actually rationed. Where
in other countries the consumption of bread increased with the
introduction of rationing, the reason is probably to be found
either in the unduly low consumption among the poor before the
event or in the inefficiency of the rationing system which allowed
duplication and excessive issue of bread cards. It was certainly not
the experience of Germany that bread rationing was accompanied
by an increase of consumption.

But this objection to the policy of price fixing may be stated
more generally. It is argued that by reducing the price of one
commodity additional purchasing power is released for other
purposes. There is thus no general reduction of consumption.
Moreover, the increased purchasing power thus rendered available
will stimulate the production and sale of commodities that it may
be undesirable to stimulate. To try to stop profiteering by fixing
the price of a few commodities will merely increase profiteering
elsewhere, and an extension of the process is like trying to stop
up holes in a sieve. So long as the free play of supply and demand

MECHANISM AND THEORY OF PRICE FIXING 29]

continues unchecked in any large part of the whole field, blind
economic forces will frustrate the best endeavour to organize the
national economy. This objection has a large element of truth,
but war experience showed that in practice it was not so serious
as might have been expected.

In the first place, it was certainly true that partial intervention
involved further intervention. To control the price of milk with-
out controlling butter and cheese, or to control butter without
controlling margarine, would have been futile. To have cheapened
cereals without controlling meat and fats would have caused a run
on cereals. To attain the right balance between the maximum
prices of a number of kindred and alternative foodstuffs (as is
illustrated in the discussion of dripping prices on p. 241) was
admittedly very difficult and the results were often arbitrary and
imperfect. But when the staple foodstuffs had been covered
(the Ministry of Food controlled in one way or another about
90 per cent. of the nation’s food supply) there came a point where
the process could stop without risk. Rare foodstuffs could be left
to market forces with the knowledge that they would provide
a few luxuries for the rich and big profits for a few traders, but
without fear that their production would be enormously stimulated
at the expense of staple foods. If there was any such danger
restrictive measures or even total prohibition could, if necessary,
be applied.

It is also true that maximum prices for food, combined as they
were with high profits and liberal wages for many classes of workers,
diverted purchasing power to other commodities. Fewer pianos,
fewer cotton and linen goods, and fewer household utilities of
many kinds would have been bought, if food prices had been
higher. In the case of some articles, like cotton and wool textiles,
the extravagant demand from domestic consumers reduced the
quantity that could be exported, a fact of some importance for
the national war effort before America entered the war. There
were undoubtedly many people of all classes who could have
afforded to pay higher prices for their food. But this does not
alter the fact that the majority, or at least a very large section,
could not have afforded to pay more without an increase in their
wages, salaries, or incomes from investment. And to have had

u2

292 COMPARATIVE STUDIES

different levels of price for the same foodstuffs varying according
to the income of the purchaser would have been administratively
impossible. Moreover, the additional purchasing power released
by maximum prices was not altogether spent in other ways ;
it might be saved, and the large amounts invested in War Loans
and Savings Certificates show that this was not negligible. To
an increasing extent it became impossible to buy luxuries, and
even comparative necessities like petrol and paint were severely
restricted. Further, to the producer, trader, and shopkeeper,
price fixing meant an actual curtailment of purchasing power,
since their profits were limited, generally to a greater extent than
their expenses were reduced by the same process applied to the
goods they had to buy. In short, the process may be described
as a transference of purchasing power from the producing and
trading classes, and persons deriving their income from shares in
companies engaged in production and trade, to the wage-earning
and rentier classes. It thus had the opposite effect of war-time
inflation.

The relation of price control to inflation is worth examining
since it leads to the heart of the objections that have been con-
sidered. If the general rise of prices was due to inflation and if
inflation was inevitable as a war-time measure, was not price
control an illusory attempt to escape from the evils of inflation,
and limitation of profits an impossible and unfair method of
interfering with the natural effects of war finance ?

Lord Rhondda in November 1917,1 in reply to critics who
expected him to perform miracles and by a wave of the wand
bring back prices to their pre-war level, said, ‘The real controller
of prices is not the Food Controller but the Treasury. The
principal factor in the rise of prices is the expansion of currency
arising from inflation of credit and the issue of large amounts of
paper money.’

This explanation had never till that time been so frankly
admitted by any member of the Government. During the first
year of the war it was usually denied that any inflation had taken
place. After the war it was accepted as a commonplace and the
general view was that inflation during war-time is inevitable.

1 Parl, Debates, H. of Lords, vol. xxvi, 1077, November 20, 1917.

MECHANISM AND THEORY OF PRICE FIXING 293

But was inflation inevitable ? Was not the policy of controlling
prices and the mechanism by which that policy was enforced an
important means of checking inflation? If the policy of price
control had been systematically and continuously applied from
the beginning of the war, was there any reason why the pre-war
volume of currency should not have sufficed for financing the war ?
This of course is a purely hypothetical question, for (as has been
constantly emphasized in the preceding chapters) price control
at the beginning of the war was psychologically and legally
impossible. But in order to realize the full import of the policy,
it is worth while attempting to give a hypothetical answer to this
question.

It will have been observed that in each of the trades which
have been referred to in this book the outbreak of war caused
a sudden and severe slump in prices. The price of jute, for
example, fell from £30 per ton to £14 per ton in three or four
months. This phenomenon was general, and was caused partly
by the sudden cessation of demand from Central Europe and
partly by the financial crisis which made every creditor anxious
to collect his debts and compelled every debtor to realize his
stocks at any price in order to meet his creditors’ demands. The
volume of credit shrank and a rapid liquidation set in. This was
equivalent to the disappearance of a large part of the currency
of wholesale trade. Bank deposits and advances contracted ;
and commercial bills running into tens of millions of pounds in
value became suddenly worthless. This was deflation on a pro-
digious scale. The effect was somewhat similar to that which
would be produced if it was suddenly announced that a large
proportion of the paper money in the country consisted of worth-
less forgeries which would not be accepted by the banks.

To some extent the deflation was immediately checked by
the Government undertaking through the Bank of England to
guarantee the dishonoured bills. This restored a large block of
currency which would otherwise have been annihilated. But
restriction of credit and deflation continued for several weeks ;
prices fell below costs of production ; heavy losses fell on holders
of stocks; and unemployment assumed formidable proportions.
The removal of Central Europe from the world market and the

294 COMPARATIVE STUDIES

uncertainties of the future caused an acute financial and com-
mercial depression.

If at this stage complete State control had been introduced
in the form in which it was eventually realized during the last six
months of the war, what would have been the position? ‘Trade
and industry would have been organized under centralized
direction, exercised either direct by a Government Department
assisted by Advisory Committees or by a Joint Control Board
representative of all interests and vested with compulsory powers,
for the attainment of the following ends :

1. Centralized control of purchase, import and distribution
of raw material.

2. Maximum production of military requirements.

3. Production of essential civilian requirements for home
consumption.

4. Maximum balance available for export.

Prices would have been regulated on the following principles :

1. Purchase of imported raw materials and foodstuffs in bulk
from producing countries at lowest prices obtainable,
where possible by contract for several years ahead.

2. Requisition of foodstuffs from farmers at guaranteed
maximum prices based on cost.

3. Manufacturers to receive for whole output fair conversion
costs and moderate profit.

4. Wholesale Distributing Merchants syndicated into Trade
Associations and remunerated as Government agents
at reasonable rate of commission.

5. Prices of civilian necessaries of life, food, clothing, house-
hold utensils, &c., to be fixed at cost price and reason-
able margin.

6. Export merchants formed into Associations and remuner-
ated on commission.

7. Prices of exports determined by world market prices with
profits or losses for the account of the central Fund of
the Industry.

With trade and industry so organized the huge demands for
the military forces would have been met without difficulty and

MECHANISM AND THEORY OF PRICE FIXING 295

more rapidly than they were under a régime of competitive
buying. Private orders that stood in the way would have been
thrust aside. But these private orders themselves would have
been submitted to a process of sifting and transformation. The
essential demands for home consumption would have been looked
after by the Department or Control Board charged with super-
vising them. If industry had been unable at any time to supply
all the legitimate demands an order of priority would have been
established ; and if owing to exceptional pressure of military
requirements or the need for encouraging the maximum export,
supplies for home consumption had had to be seriously restricted,
the limited supplies available would have been rationed and
distributed as fairly as possible. None of these measures would
have necessitated prices rising above a reasonable maximum price
based on cost.

The necessities of war would have compelled much larger
import of certain commodities, machinery, ores, food, and raw
material. This might have necessitated paying increased prices
owing to a general world shortage. But not necessarily so.
Advantageous long-term contracts made at the outset of war
might have secured largely increased imports without the necessity
of paying more than average pre-war values. For example, the
purchase of the Australian wool clip two years earlier on a five-
year contract might have been negotiated on more favourable
terms than were actually agreed to in 1916, owing to the depres-
sion ruling in the world market at the time. Australasian meat
was in fact bought in October 1914 by the Board of Trade at
a price of 44 per lb., which owing to inflation gradually became
worth half the contract figure and was never increased up to the
end of the war. Secondly, increased imports of some commodities
would have been largely compensated for by drastic reduction
of less important imports. Large sums were spent abroad during
the first three years of the war on articles which made no contri-
bution to the successful prosecution of the war and were in fact
dispensed with during the last year. Thirdly, though exports
might still have been necessarily reduced much below their pre-
war volume, it by no means followed that their value would have
been reduced. Even the volume might have been greater

296 COMPARATIVE STUDIES

than it was, given a more systematic organization of industry. The
volume exported during the war was quite unnecessarily reduced
by the measures adopted for restricting exports, as an indirect
means of keeping prices low at home and safeguarding supplies
for essential purposes. By more detailed control and a better-
informed grasp of the situation in each industry, more goods
might have been exported than were actually allowed to go.
Prices obtained for export, again, might have been higher than
they were, if selling had been concentrated in a single body
in each trade and the full possibilities of the world market ex-
ploited to the utmost. For with Central Europe out of the world
market, the demand for certain manufactured goods which had
formerly been met by Germany became transferred to some extent
to Great Britain. Further, there was a growing world shortage
of many articles, such as clothing and metal goods, owing to the
huge consumption of the armies ; and monopoly prices in these
lines might have been obtained. As it was, foreigners often made
large profits at our expense by buying cheaply behind the barrier
of restrictions and prohibitions, and then getting a licence to
export.

It will be objected that other countries would hardly have
been so gullible as to let their exports go at pre-war prices and
submit without retaliation to exploitation in the prices paid for
their imports. It is questionable, however, whether without estab-
lishing a corresponding control of imports and exports they would
have been in a position to interfere effectively. Raw materials
and food were throughout the war undervalued in the world
market compared with manufactured goods, owing to the fact that
the consumption of the former and the production of the latter
had both been reduced by the cutting off of Central Europe. It
will also be objected that though this policy might, owing to their
unfortunate economic situation, have been successfully applied
to Australia, New Zealand, Africa, and Asia, there was no means
of getting the better of North and South America, which supplied
us with many essential raw materials and wanted only a small
amount of our manufactures. This objection is a valid one;
but three considerations may be advanced in reply. First,
exports to America might have been increased if deliberate effort

MECHANISM AND THEORY OF PRICE FIXING 297

had been made to do so; secondly, sales of foreign securities
might have been increased ; and thirdly, far less would have been
purchased in the United States if industry had been mobilized
sooner in Great Britain.

Lastly, it will be urged that, however complete the control
imposed on trade and industry, the immediate transfer of pur-
chasing power from private individuals to the State, which the
situation demanded, could never have been accomplished without
some measure of inflation. Taxation, that is to say, was not
a sufficiently elastic device to provide the immensely increased
purchasing power which the Government required, however low
prices were kept by control. Recourse to the disguised form of
taxation, proportionate to income, which inflation involves, was
therefore necessary. No doubt immediate Ways and Means
Advances from the Bank of England would have been necessary ;
but the idea that taxation could not have been suddenly increased
even to the extent of doubling the Income Tax is surely erroneous.
Faced with an income-tax of, say, ten shillings in the pound, many
persons and firms might have been compelled to borrow more
from the banks, and to this extent there would have been in-
flation. But that such advances would have been paid back
sooner than advances by the banks to the Government can
hardly be doubted. Every taxpayer would have seen his share
of the National Debt piling up against him individually at his
bank instead of being piled up on his account by the Government ;
and apart from the pressure which would have been put upon
him by his bank, he would himself have had every inducement
to try and clear himself as soon as possible by practising the
utmost economy. It was only by the economy actually practised
that the Government did obtain command of the resources it
required ; but the compulsory economy induced among rentiers,
among the salaried and professional classes, and to some extent
among wage-earners, was largely offset by the involuntary
fortunes made by the producing and distributing classes ; and
therefore, apart from its gross injustice, inflation was never a very
effective way of securing the maximum transfer of wealth to the
State. Indeed, inflation is generally recognized to be quite the
most unscientific and wasteful form of taxation ever devised.

298 COMPARATIVE STUDIES

Hypothetically, then, there is much to be said for the view
that inflation could have been avoided or at any rate reduced to
much smaller proportions, if a policy of complete State control,
combined with such measures of taxation as almost to amount
to ‘conscription of wealth’, had been adopted. The technique
of price control has an additional importance, if it can be regarded
as a means whereby some of the evils of war-time finance might
have been avoided.

CHAPTER XXIV
THE STATE AS IMPORTER

Reasons for State purchase — Sugar — Meat — Flax — Kips — Jute —
Wool — Hemp — Butter and cheese — Oilseeds —Summary of reasons —
Methods of purchase — Dominions — India — Crown Colonies — Egypt —
Russia — United States — Neutral countries.

Purchasing organization — Union of official and business methods — Variety
of forms — Centralization in wool — Decentralization in oilseeds — Buying
agents in flax and hemp — Contrast with jute — Official Buying Mission for
food purchases in U.S.A. — Semi-official trade organization in butter and cheese.

Must State import be a monopoly ? — Conditions of success in Government
trading operations — Business men as officials — Charges of incompetence —
Competition versus centralization the issue — Recent tendencies in producing
countries.

THE most striking feature of State intervention in most of the
trades and industries with which this volume is concerned was
the import of raw materials and foodstuffs on Government
account. This was the key to nearly all the subsequent measures
of control. In order to intervene effectively in distribution and
manufacture the Government was compelled to obtain actual
possession of staple commodities at the source. The different
measures by which this was accomplished will be considered in
this chapter.

Reasons for State purchase

The main reasons that led to the development of State import
may be recalled by briefly summarizing the order of development.
The earliest example of import monopoly was that created by the
appointment of the Royal Commission on Sugar Supplies in
August 1914. The reason for this step was the cutting off of the
normal source of sugar supplies in Central Europe and the neces-
sity for taking special measures to obtain supplies elsewhere with
the least possible disturbance in the world market. Government
monopoly and the elimination of competitive buying by private
merchants was considered to be the most effective way of accom-
plishing this object.

300 COMPARATIVE STUDIES

In October 1914 the Board of Trade undertook at the request
of the War Office to purchase the frozen meat required by the
Army and for this purpose negotiated direct with the Australian
and New Zealand Governments. In this case there was no
Government monopoly, supplies for the civilian population being
left to be provided by private traders.

The first experiment in State import described in this book
was the purchase of Russian flax by the War Office, which began
in March 1916. By this step the War Office undertook, not merely
to supply its own requirements, but to provide raw material for
civilian trade. The chief grounds for intervening were the difficul-
ties experienced by private traders and manufacturers in obtaining
transport on the railways to Archangel, and the speculation which
was forcing up prices and causing confusion in the interior of
Russia. But the decision was also influenced by the desire of the
War Office to stabilize prices and to apply the costings system
to the manufacture of linen goods.

In May 1916 raw kips were purchased and imported from India
on Government account, partly in order to check speculation and
to reduce prices, but mainly in order to increase the supply of raw
material for army boots. At first Government purchase was
limited to hides suitable for military purposes, but at a later stage
it became necessary for the War Office to buy the whole output
of kips and to resell those unsuitable for military purposes for use
in the civilian trade.

In August 1916 the War Office decided to provide the raw
material required for the manufacture of jute goods for military
purposes, but left the supply of jute for civilian purposes to private
trade. In this case there was no shortage in the country of origin ;
but owing to the scarcity of tonnage the Government had to
restrict the importation of jute and ensure sufficient supplies for
its own needs at a reasonable price.

The purchase of the Dominion wool clips in November 1916
was at first intended to apply only to the raw material required
for military purposes, but owing to the representations of the
Dominion Governments it became necessary to buy the whole
of the clips and establish a complete monopoly. The main objects
were to safeguard supplies, to check speculation and the constant

THE STATE AS IMPORTER 301

rise of prices, to provide a stable foundation for the application
of the costings system, and to determine the exact quantity and
quality of the raw material to be imported.

In the case of Manila hemp, the import of which was mono-
polized by the War Office in April 1917, the main objects were to
check the rise of prices and to ensure that the limited amount of
tonnage available was used to the best advantage.

At the Ministry of Food, towards the end of 1917, meat,
butter, and cheese were purchased on Government account for
the purpose of guaranteeing supplies for civilian consumption at
the lowest possible price. By this time the market prices ruling
in the different countries of origin. varied considerably owing to
local differences in the relation of supply and demand. Owing to
the shortage of tonnage and restrictions on the free movement of
shipping, the price of meat was low in Australia and New Zealand,
fairly high in South America, and higher still in the United States.
Sunilarly the price of butter varied from over 400s. per cwt. in
Denmark to 150s. per cwt. in Australia and New Zealand, with
intermediate prices ranging from about 170s. to 200s. per cwt.
in the Argentine and Canada. Under such conditions Govern-
ment monopoly of import was the only means of ensuring that the
selling price in Great Britain was kept down to the average cost
by pooling supplies from all sources.

In the case of oilseeds, Government purchase was necessary
in order to stabilize the issue price of raw materials to manu-
facturers, and to apply the costings system and fixed margins to
the various processes of transformation from the raw material
to the finished article. Government purchase of foodstuffs was
also necessary to secure the most economical use of tonnage and
finance, and to prevent competitive buying between the different
Allies.

In general, then, the reasons for State import may be summar-
ized as follows :

1. To safeguard supplies for military purposes when private
trade could not be relied upon.

2. To check speculation and competitive buying on the part
of private traders.

3. To stabilize basic prices and thus render it possible to

302 COMPARATIVE STUDIES

regulate prices throughout the various processes of manufacture
and distribution by the application of the costings system. .

4. To secure supplies for civilian purposes, either because
private trade was unable to cope with the task or because it was
inconvenient to distinguish between military and civilian supplies.

5. To secure the most economical use of tonnage and finance
by deliberate selection of the exact quantity and quality, which
it was most advantageous to import.

6. To avoid competition between the Allies, and to assist
Allied countries by obtaining supplies for them under the most
favourable conditions.

7. To keep prices for civilian consumption as low as possible
by pooling the cost of commodities obtained at varying prices
from a number of different sources of supply.

Methods of purchase

Since the actual methods of purchase depended to a large
extent upon conditions ruling in the country of origin, it will be
convenient to compare the broad differences that were met with
in the principal exporting countries. In 1917 and 1918 to those
responsible for obtaining supplies from abroad the world was
divided into three categories, black, white, and grey. Black was
the enemy territory, where no supplies could be looked for ; white
was the British Empire and Allied territory; grey, the lands
which were neutral. Purchases in white territory were compara-
tively easy ; in grey more difficult. But the British Empire and
the Allies together covered such a large proportion of the earth’s
surface that there were not many raw materials or foodstuffs
that could not be obtained there. Taking the British Empire
first, the methods of purchase may be broadly distinguished
as follows :

1. The Dominions. The Commonwealth Government in
Australia and the Department of Imperial Supplies in New Zealand |
made themselves responsible for purchasing, collecting, storing,
and shipping their principal foodstuffs and raw materials as
agents for the British Government. Long-term contracts,
generally for the whole exportable surplus, were concluded
between the British and Dominion Governments at fixed prices.

THE STATE AS IMPORTER 303

The chief commodities so purchased were wheat, wool, skins,
hides, hemp, meat, butter, and cheese, apart from lead and other
commodities bought by the Ministry of Munitions. Purchases
of foodstuffs were also made in Canada through the Canadian
Government.

2. India. The Government of India acted in a similar manner
in regard to a number of commodities, such as wheat, hides, and
oilseeds. In India, however, owing to its.vast size and its illiterate
population, there could never be the same direct relations between
- the Government and the producer as in Australia and New Zealand.
The internal markets for grain, jute, and linseed, for example, were
left free; purchases for export were made at prices ruling from
time to time, and were not fixed once and for all as in the case of
contracts with the Australian and New Zealand Governments.
In consequence, the British Government sometimes arranged to
deal direct with shippers, as in the case of jute and some oilseeds ;
and in other cases obtained supplies from agent firms controlled
by a commissioner appointed by the Government of India.

3. Crown Colonies. The system adopted in Crown Colonies
varied in different circumstances. The Governor of Ceylon acted
as agent for the British Government for the purchase of coco-nut
oil. In West Africa oilseeds and palm oil were not bought by the
Government, but export was prohibited to all destinations except
the United Kingdom, where supplies, for which tonnage had been
specially provided by the Ministries of Food and Shipping in their
Import Programme, were requisitioned on arrival at fixed prices.
This was one of the rare cases where the Government was willing
to pay for imported supplies on a c.i.f. basis, that is, with freight
and insurance added to the cost; but since after the general
requisitioning of tramps and liner space, profits on freight went
to the Ministry of Shipping, the system differed only slightly from
direct purchase and import.

4, Egypt. A system similar to the Australasian precedent was
adopted in Egypt for the purchase of cotton seed. By arrangement
with the Egyptian Government a Cotton Seed Control Board was
set up to purchase the whole exportable surplus of cotton seed at
a fixed price on behalf of the British Government. A similar
method was afterwards applied to Egyptian cotton.

304 COMPARATIVE STUDIES

5. United States. When America entered the war and the
United States Government assumed control of exports, purchases
by the British Government were made there by special Buying
Missions, which bought either from the United States Administra-
tion or with its permission at prices and from sources indicated by
it. In this manner the Ministry of Food bought frozen meat,
canned meat, bacon, butter, cheese, dried and condensed milk,
oils and fats, and canned fruits. In addition wheat was bought
through a special agency created by the British Government,
called the Wheat Export Company.

6. Philippines. Manila hemp was bought through the agency
of British firms without the intervention of the United States
Government.

7. Russia. Flax and flax seed were bought in the interior of
Russia by four established British firms operating as Government
agents. The Russian Government gave priority for War Office
purchases on. the railway to Archangel, and provided roubles
against sterling in London. This scheme supplies a rare instance
of the British Government buying direct from peasants in the
producing country.

8. France. Hides, butter, and cheese were obtained in small
quantities with the assistance of the French Government.

9. Neutral countries. As a rule purchases in neutral countries
were made without the intervention of the Governments. For
example, in the Argentine linseed was bought in competition with
the rest of the world through agent firms operating under the
supervision of the Wheat Commission. In Denmark butter and
bacon, and in Holland cheese and flax, were bought in competition
with German and Austrian buyers. But gradually even the
Governments of neutral countries were compelled to intervene in
these negotiations. They either regulated the quantities to be
exported or the price to be paid, or established an export mono-
poly, as in Holland. As the rationing of European neutrals
became more severe exports to the United Kingdom became an
important bargaining asset, and quantities and sometimes prices,
e.g. of Dutch margarine and cheese in exchange for oilseeds
and oilcakes, would be settled between the British and Neutral
Governments. ,

THE STATE AS IMPORTER 305

Purchasing organization

Just as the method of purchase in the country of origin varied
in different commodities according to local conditions, so there
was considerable variety in the form of purchasing organization
set up by the British Government. Attention has been drawn
before to the absence of any common plan of organization and to
the fact that each new emergency was tackled as a problem by
itself with little reference to the precedents established in other
spheres. This lack of uniformity had its compensating advantages;
it meant that the field was left open for experiment and that an
opportunity could be given to each Controller to give free play
to his own initiative. There was no recognized model for the
organization of State import. The method adopted usually repre-
sented a compromise between official routine and business methods.

The union might take one of two forms. Either the methods
and functions of a private business were grafted upon a Government
Department, as in the purchase of flax and jute; or the methods
and functions of a Government Department were undertaken by
a body of private traders, like the Butter and Cheese Imports
Committee or the United Kingdom Oilseed Brokers Association.
The former procedure introduced commercial enterprise into
a Government Department, the latter converted a group of
private firms into a branch of the public service.

In the early stages of the war the methods adopted conformed
more closely to the usual official practice. The Government, even
in times of peace, is probably the largest single purchaser in the
country, and employs a number of officials to do its buying.
The War Office, the Admiralty, the India Office, the Post Office,
the Crown Agents for the Colonies, and the Office of Works all
have their Contracts or Stores Departments, staffed by a trained
personnel, who probably buy as cheaply and efficiently as the
officials of the London Traffic Combine or the large multiple shops.
As in the case of most large firms, the regular official practice was
to go straight to the source and to buy direct without the inter-
vention of intermediaries. The employment of agents, brokers,
and middlemen was contrary to the general rule.

It was natural, therefore, that early developments in State

1569.53 x

306 COMPARATIVE STUDIES

purchase should follow traditional lines. When the Government
needed meat for the Army, or wool for military clothing, the plan
adopted was to create a special sub-department to carry through
the transaction in the simplest and most economical manner.
The purchase of meat was entrusted to a branch of the Board of
Trade, and the purchase of wool to the Raw Materials Department
of the War Office. In both cases the purchase was completed in
a few days by entering into long-term contracts with the Australian
and New Zealand Governments. Private trade was thus elimi-
nated automatically. In the case of wool, thousands of clerks,
managers, and directors, who were normally engaged in attending
to individual transactions and cargoes, were replaced by a single
office consisting of about a hundred clerks and a dozen or so
experts, in which was centralized all the documentary work of
buying, shipping, and distributing the colonial wool clips.

This system was probably as economical as any that could have
been devised, and it arose naturally out of the regular official
practice of dispensing with intermediaries. But the excessive
centralization which it involved was bound to cause hardship and
discontent among the firms who lost their usual business; and
the creation of a brand new organization, whatever advantages
it might have from the point of view of economy and simplicity,
was bound to take a considerable time, and to place a heavy burden
on the officials responsible for selecting the right staff and getting
the machinery into working order. Moreover, there were strong
reasons for avoiding any undue dislocation of the usual trade
channels in view of the temporary character of Government control.

These various reasons, and above all the need for securing the
willing co-operation of traders in the administration of control,
led the Ministry of Food to discard the plan of centralizing in its
own hands all the operations of an importing firm. In the case of
oilseeds, the handling of shipments on arrival and most of the
detailed accounting and documentary work were entrusted to
the United Kingdom Oilseed Brokers Association, a body con-
sisting of all the recognized brokers in the trade combined together
in a single organization for the purpose of acting as Government
agents. The plan adopted for the purchase of Egyptian cotton
seed provides a good illustration of the new method of delegating

THE STATE AS IMPORTER 307

responsibility. A Cotton Seed Control Board consisting of the
leading men in the trade was established by the Egyptian Govern-
ment in Alexandria, for purchasing the seed at fixed prices from
the Egyptian growers. The necessary funds were provided by
the National Bank of Egypt against a general guarantee from the
British Treasury. On arrival of the goods in Great Britain they
were allotted by the Crushers Advisory Committee to various
mills. The Oilseed Brokers Association handled the shipping
documents, looked after the discharge and forwarding of each
consignment, and reimbursed the Bank out of the proceeds of sale
to the manufacturer. Throughout the whole process the inter-
vention of the Ministry of Food was reduced to a minimum. The
original contract to take the whole exportable surplus at a fixed
price, the Treasury guarantee to the Bank, and periodical instruc-
tions to the Oilseed Brokers Association as to the arrival and
disposal of cargoes were practically all the work that fell on the
Government. The detailed administration of the scheme was left
in the hands of the trade itself.

In the case of Russian flax the circumstances were in many
respects exceptional. Owing to the disorganization on the Russian
railways and the closing of the Baltic ports to British ships, the
difficulty was to get supplies from the interior to the port of
shipment at Archangel. If either the Russian Government or
private Russian exporters had been able to guarantee delivery at
Archangel, the War Office would have been able to buy the flax
delivered f.o.b. and then merely arrange with the Admiralty or
Ministry of Shipping for the provision of the necessary tonnage.
But the principal exporters of flax were not Russian firms but
British. Four of the largest flax shippers in Great Britain had
been established in the interior of Russia before the war, and had
numerous buying agencies in the flax-growing districts. The War
Office therefore appointed these four firms Government buying
agents, paying them a fixed commission per ton to cover their
expenses and remuneration. In this manner the British Govern-
ment bought flax direct from the Russian peasant in much the
same way as it bought wool from the English farmer. Arrange-
ments could then be made with the Russian Government for
War Office flax to be carried on the Russian railways as British

se

308 COMPARATIVE STUDIES

Government stores, and for the necessary roubles to be supplied
in exchange for sterling in London without every transaction
having to pass through the foreign exchange market. The prices
paid varied from time to time according to market conditions in
the interior of Russia. But the fact that export was virtually
monopolized in the hands of the British War Office exercised
a steadying influence on the internal price level.

The arrangements for buying Manila hemp bore a certain
resemblance to the Russian flax scheme. The principal British
shippers had branches in the Philippines and were thus able to
buy for the British Government direct from the growers or from
local dealers. The only difference that Government purchase made
was that the War Office became responsible for providing finance
and tonnage, that the British shippers combined together instead
of competing with one another, and that their profits were limited
to the amount by which the fixed margin per ton allowed to them
exceeded their establishment charges and buying expenses. In
other respects the purchase and import of both flax and hemp were
conducted in much the same way as in ordinary times. The
regular importers continued to function in the usual way, but
received a controlled margin of profit in place of a speculative
rate of profit depending on the state of the market in the producing
and consuming couniries.

The reason why the same procedure was not adopted in the
purchase of raw jute has been explained in Chapter VII. There
was never any shortage of raw jute in India during the war.
The War Office was therefore able to obtain its own requirements
more cheaply by inviting competitive offers for delivery f.o.b.
Calcutta than by attempting to buy in the interior or by guaran-
teeing a fixed margin of profit to British importers. No long-term
contract was necessary or desirable, and purchases were made
from day to day in the London market or by cable to Calcutta in
exactly the same way as a large business firm might have bought.
The success of this system depended chiefly on the fact that
Mr. George Malcolm, who undertook the purchase of raw jute for
the Government, was one of the foremost experts in the trade.

Two other forms of organization were introduced at the Food
Ministry, the official buying mission, and the semi-official trade

THE STATE AS IMPORTER 309

organization. The official buying mission was used in the United
States, where the Food Administration insisted that only Govern-
ments should buy prohibited exports and then only with the
advice and approval of the United States authorities. The British
and other Food Missions in the United States resembled the
Allied Buying Missions which were set up early in the war in
Great Britain. They were combined in a body called the Allied
Provisions Export Commission, which ensured co-ordination
but was not an actual purchasing organization. The Buying
Mission made purchases from day to day, on cabled instructions
from the Ministry of Food in London. A single contract was made
at one time for the purchase of £400,000 worth of bacon. The
machinery of private trade was dispensed with as in wool purchase,
but one reason for this was that purchases of provisions on such
a large scale in the United States had not been a normal feature
of trade before the war. Owing to the concentration of shipping
in the Atlantic new buying machinery had to be specially created
by the Ministry of Food. But the recognized importers of pro-
visions were generally employed as agents for looking after the
receipt and distribution of cargoes on arrival in British ports.

In the case of butter and cheese the buying organization acting
on behalf of the Ministry of Food was a committee of private
traders called the Butter and Cheese Imports Committee. This
Committee was established by the Food Controller in December
1917 to take over the responsibility for shipment, handling,
inspection, storage, and distribution of butter and cheese under
the direction of the Ministry of Food. Its financial operations
were subject to control and audit by the Ministry and were guar-
anteed by the Treasury. A fixed commission of 4 per cent. was
credited to the Committee to cover the expenses of administration.

From this review of the various methods of purchase adopted
certain general conclusions may be drawn.

1. Where the Government required raw materials or food-
stuffs for supplying its own requirements, the usual official routine
could be followed, especially where all that was necessary was to
buy from the usual importers in the London market.

2. Where the Government’s own requirements amounted to
a large proportion of the total imports, it was desirable where

310 COMPARATIVE STUDIES

possible to make arrangements with the Governments of the
exporting country for a long-term contract at a fixed price as in
the case of frozen meat for the Army from Australia and New
Zealand.

3. Where no arrangements could be made for a long-term
contract at a fixed price, it was preferable for the Government to
buy f.0.b. from private exporters rather than c.i.f. from importers
in London. The best course in such cases was to employ the
services of an expert buyer who knew the trade and was in a
position to take advantage of the most favourable opportunities
for buying.

4. Where owing to transport or other difficulties private
trade was unable to bring forward sufficient supplies, or where
it was impossible or inconvenient to discriminate between supplies
required for military or civilian purposes, the Government was
compelled to establish a State monopoly of import in order to
safeguard supplies and control prices.

5. State monopoly might be administered either by employing
a large number of trade experts as salaried officials as in the case
of wool purchase, or by employing private firms on agency terms.

6. The Government purchasing agents might buy either from
local producers and dealers f.o.b. port of shipment, or where
necessary from peasants in the interior.

7. In either case the agent firms would be remunerated by
a fixed margin to include their establishment charges and buying
expenses.

8. While the general supervision of the agents’ operations and
the provision of tonnage and finance rested with the Government,
the detailed work could be conducted on the usual commercial
lines by the firms normally engaged in the trade.

9. Decentralization might proceed still further through the
appointment of a trade organization guaranteed by the Treasury
and subject to Government audit and a fixed rate of remuneration.

General features
It may be useful to consider in the light of war experi-
ence two questions about Government trading operations that
are often raised. First, must import on Government account be

THE STATE AS IMPORTER 311

a monopoly or could it be carried on side by side with private
trade? And, secondly, could the Government buy as efficiently
and economically as the machinery of private trade ?

In March 1916 the purchase of Russian flax was declared
a State ‘monopoly; Indian jute, on the other hand, was
bought by the War Office, from the summer of 1916 till the
Armistice, for military requirements alone in competition with
private traders. The Board of Trade was buying frozen meat
for the Army as early as October 1914, and continued to do so
for a long time, before it became necessary for the Ministry of Food
to monopolize meat supplies for the whole country. For some
months before the Royal Commission on Wheat Supplies was set
up to undertake the entire provisioning of the country in grain,
Government purchases were being made to a limited extent in
competition with private traders by the Wheat Import Committee.

The explanation of these opposite policies adopted at different
times and in different cases will be found to lie in the degree of
shortage in the sources of supply. The only way to be sure of
getting enough Russian flax was to eliminate as many competitors
as possible. Jute, however, was so abundant that a complete
import monopoly, by depressing prices still further, might have
started a demand for a guaranteed price for the whole crop, which
was far more than the country needed. The Board of Trade bought
meat for the Army under long-term contracts at more favourable
prices than the civilian population had to pay. It might, indeed,
have proved advantageous for the nation if the whole supply
required had been bought by the Government from the beginning
of the war ina similar way. Three years later the Ministry of Food
had to do this at a much higher level than the contract prices
paid for Army supplies. But purchases for the Army alone
presented no difficulties, since there were other sources of supply
left open to private trade. The case of wheat, on the other hand,
illustrates the danger of limited State purchase where there was
a world shortage of supply. As private traders had no means of
knowing the exact quantities bought by the Government and
were afraid of being undersold at any time through the Govern-
ment unloading its stocks when supplies were short and prices
high, they hesitated to enter into commitments themselves and

312 COMPARATIVE STUDIES

thus forced the Government to buy more and more; it was then
seen that a complete State monopoly was the only alternative to
complete freedom.

In general then it may be said that whereas it was feasible to
obtain supplies for the Government’s own needs, e.g. for the Army
and Navy, without creating a Government monopoly, purchases
made in order to resell to the civilian population had to be either
left free or completely controlled. The Government had such vast
financial resources behind it and was naturally so disposed to be
governed by considerations of policy rather than of profit, that
private traders did not feel safe when the Government was com-
peting with them. This principle did not exclude forms of control
whereby the Government expressly recognized the sphere of
certain private importers side by side with its own activities, and
in fact guaranteed them a fixed price for their produce on arrival.
This form of control existed in the case of South American wool,
East Indian wool, and many oilseeds. In such cases, however,
the Government was virtually a monopolist, and the private
importer was acting as a recognized agent forming one part of a
single system.

It is hardly possible to give any answer to the familiar question,
*Can the Government buy as efficiently and economically as the
machinery of private trade?’ It depends on the methods adopted
and the skill of the personnel employed. During the war it was
of course just because the Government considered in each case
that the most efficient and economical method to adopt was direct
purchase, that it was compelled, generally against its will, to adopt
that course. But it is usually thought so unlikely that a Govern-
ment should acquit itself even tolerably well in commercial
operations, that some explanation is necessary to explain why
this was so.

In the majority of cases the Government enjoyed important
advantages over private traders. Perhaps the greatest advantage
for Government purchase was in those cases where supplies could
only be obtained by agreement with another Government, which
undertook to provide special facilities. Russian flax was obtained
by the War Office, when private importers had failed, because it
was given certain privileges by the Russian’ Government. Goods

THE STATE AS IMPORTER 313

bought by the War Office were military stores and were granted
priority on the Russian railways. The Treasury was able to
obtain roubles from the Russian Ministry of Finance when private
traders found great difficulty in doing so. Again, at a later stage
in the war, it was only possible to purchase foodstuffs and raw
materials in the United States with the consent of the United
States Government, and as a rule consent was only given to
purchases on Government account. Indeed, in order to strengthen
and facilitate Inter-Allied co-operation each Government made
concessions to an Allied Government which it would refuse to an
Allied trader.

Akin to the above are the instances where the British Govern-
ment was able to make special arrangements with the Dominion
Governments or the Crown Colonies. The usual preliminary was
the prohibition of export from the Dominion or Colony except
to the United Kingdom. This system often imposed a heavy
sacrifice on the producers in the exporting country, as the price
level tended to fall below world prices, and sometimes large stocks
would accumulate which would eventually be released under an
arbitrary system of licences that gave a large profit to the fortunate
licencees. Gradually, therefore, as a corollary to prohibition of
export except to the United Kingdom, the practice grew up of
guaranteeing a fixed price for imports, as in the case of East
Indian wool, or of contracting to purchase the whole exportable
surplus for a year or more ahead. Favourable contracts could
be made in this manner, which would have been impossible
to any private trader or combination of traders, owing to the
vast scale of the transactions. The purchase of the Australian
and New Zealand wool clips by the British Government for
the period of the war and one year after at a fixed price is the
best example of such large-scale transactions. When this vast
deal is contrasted with the ordinary procedure of private trade,
which necessitates hundreds of separate transactions each day
throughout the greater part of the year at constantly fluctuating
levels of price, it will be realized why in spite of its mertia and
lack of commercial enterprise a Government Department has
resources and advantages, at any rate in time of national emer-
gency, which enable it to compare favourably in efficiency and

314 COMPARATIVE STUDIES

economy with the largest, or even with the smallest, private
firm.

It was not only, however, in large-scale transactions that the
Government succeeded in buying successfully. An examination
of the trading accounts for Russian flax and raw jute shows that
ordinary commercial transactions could be conducted satis-
factorily, provided the services of the best buyers were obtained.
In ordinary times such men would be earning too high a remunera-
tion outside to be attracted to the Government service; but in
time of war the Government could command the willing services
of the foremost experts in each trade, and pay them little or no
remuneration. When the Government’s trading operations were
carried on by the foremost business men in a trade, it became
absurd to generalize about the Government’s incapacity to buy
and sell in a businesslike manner; but this fact was perhaps not
generally realized, and to the established civil servant it was often
a source of amusement to find that business men in Government
Departments were often criticized for incompetence and extra-
vagance just as much as if they had been ordinary hide-bound
officials.

Lastly, when purchase and import were entrusted to a group
of traders, guaranteed by and responsible to the Government but
otherwise free to conduct their business as they thought fit, the
distinction between Government and private trade became blurred,
and the ordinary criticisms were even less applicable. The real
distinction and the real controversy, which is likely to continue for
many years, is between the respective advantages of centralized
marketing and competitive trade, After the war some of the
leading butter importers proposed that the centralized system
of import, which they had been undertaking for two years on
behalf of the Ministry of Food, should be continued through the
creation of a statutory Butter Import Corporation by Act of
Parliament. The project was never submitted to Parliament,
and the reasons why the leading men in the butter trade thought
it preferable to continue centralized import under Government
supervision in place of free competition have not been made
public. The project was doubtless premature.

Since then, however, there are signs that the movement for

THE STATE AS IMPORTER 315

centralized marketing is beginning to receive considerable impetus
from the producers in agricultural countries. If at any time the
producing countries, whether through Government action, or
through the co-operative movement, or by means of commercial
trusts, succeed in centralizing the sale of staple products, the
question of meeting such a move by centralized purchase in
consuming countries will again receive attention. In that event
the various experiments which were made in centralized purchase
during the war may throw some light on the best methods to
adopt.

CHAPTER XXV
THE COSTINGS SYSTEM

Profiteering and the costings system — Costing in private business —
Machinery of cost investigations — Pre-war indifference to costing — Employ-
ment of Chartered Accountants — Work of Costings Department at Ministry
of Food — Confidential nature of work — Regulation 2 G — Distinction between
items chargeable to cost and to allocation of profits — Adjustment to varying

circumstances.

Cost of production in economic theory — Prices normally determined by
marginal cost of production — No longer applicable in war-time — Limitation
of monopoly profits by costings system — Complexities of applying the costings
principle — Distinction of Government requirements and civilian needs —
Treatment of importers, wholesalers, retailers, manufacturers, farmers —
Objection that costings system gives large profits to best firms — Differential
rent under normal conditions — Without costings system war profits would
have been larger — Not always necessary to base prices on highest cost —Striking
divergence in costs between efficient and inefficient firms — Bearing of this on
economic laws — Survival of the unfit increases differential rent — Average
costs as basis of fixed prices — Pooling and unification — Application to distribu-
tion, manufacture, agriculture.

‘ PROFITEERING ’ and the ‘ costings system ’ are expressions to
which it would have been difficult for most people to attach any
meaning before 1914. Profiteering may be defined as taking
advantage of the state of the market to obtain exorbitant profit ;
the ‘ costings system ’ is the principle of determining fair prices
by reference to the cost of production and a reasonable profit.
The costings system thus came to be regarded as the natural and
proper cure for profiteering; but like many popular catchwords
it suffers from ambiguity and suggests a simplicity which is apt
to be misleading. The term is derived from the practice of
examining costs, which, as previous chapters have shown, was an
essential but comparatively small part of the business of control.
By transference one part of the process is taken to signify the
whole.

Examination and comparison of costs, or as it is called by
accountants ‘ costing ’, though it received a great stimulus from
the war, was of course practised in well-organized businesses long
before the war. Its purpose was to enable the directors and

THE COSTINGS SYSTEM 317

managerial staff to know as exactly as possible the cost of any
process or the cost of making or handling any commodity. This
not only guided them in quoting competitive prices in the market,
but also gave them statistical evidence as to the directions in
which greater economy and efficiency could be achieved. Com-
parison of costs in different workshops and at different times
provides the best means of detecting extravagance, waste, and bad
organization. The purpose for which the Government made use
of cost investigations was rather different. The business man
uses costings for reducing costs and increasing profits; the
Government used them for ascertaining costs and limiting profits
to a reasonable figure. The term ‘costings system’ therefore
covers both the principle of fixing prices with reference to costs,
and the methods by which costs were determined and prices and
profits were fixed. In this chapter consideration will be given
first to the methods employed and then to certain general
principles involved.

The machinery of cost investigations

The earliest example of cost investigation referred to in the
present volume was the inquiry made in the spring of 1915 in the
jute industry. Attempts were first made to arrive at a rough
estimate by questioning manufacturers direct. This method had
its uses, and throughout the war representative committees of
manufacturers and traders supplied a mass of useful information,
advice, and criticism on the difficult problem of arriving at agreed
costings. But experience showed that the views of manufacturers
and traders as to their own costs were often surprisingly wide of
the mark. Often they were quite ignorant on the subject, not
having been accustomed to empioy skilled accountants to conduct
cost investigations for their own use. Their guesses, or working
hypotheses, were in such circumstances liable to be consciously
or unconsciously biased by the desire to drive a good bargain ;
and a mind habitually devoted to the practice of bargaining is apt
to be impatient of exact calculations and the rigours of scientific
truth.

Early in 1915 the Army Contracts Department began to employ
the services of chartered or incorporated accountants to conduct

318 COMPARATIVE STUDIES

cost investigations on its behalf. Two of the leading firms of
accountants in London lent the services of two or three of their
experts as whole-time officials temporarily attached to the War
Office. Detailed investigations were then undertaken under their
supervision by outside firms of accountants, who were either
specialists in a particular trade or carried on a general practice
in the district where the business was situated. Thus local firms
of chartered or incorporated accountants in Dundee, Bradford,
Belfast, Dublin, and elsewhere were employed in connexion with
the control of the textile and leather trades.

At the Ministry of Food Lord Rhondda established 3 in July
1917 a Costings Department under the contro! of the Financial
Secretary, Sir Harry Peat, K.B.E., a partner in the firm of Sir
W. B. Peat & Co. This Department was staffed by a small
number of trained accountants; but the vast range of trades
dealt with rendered it impossible to carry on all the necessary
inquiries without outside assistance. It was therefore decided
to make use of the services and organization of the accountancy
profession throughout the country. Prominent firms of chartered
accountants were selected in each important centre of trade
and industry on the nomination of the President of the Institute
of Chartered Accountants, and were appointed District Super-
vising Accountants of the Ministry of Food. These firms were
employed to investigate the books of any manufacturer or trader
whose costs were under examination.

The main principle laid down by Lord Rhondda was that
profits should be limited at every stage of production, manufacture
and distribution to a fair and proper remuneration for the services
rendered. This did not, of course, mean that the books of every
firm had to be examined. The usual procedure was for the Ministry
to discuss the question with a representative committee of the
trade and to agree that certain selected firms should be taken as
typical. The Costings Department would then draw up instruc-
tions and cost sheets for the guidance of the District Supervising
Accountants and request them to investigate the books and records
of these particular firms. On the basis of the reports received
from the District Accountants the Costings Department would
draw up a general report setting out the conclusions to be drawn

THE COSTINGS SYSTEM 319

from the statistics furnished. This general survey would supply
the basis on which the Supply Department would fix a fair margin
or maximum price at each stage of production and distribution,
which, after further discussion with the representatives of the trade
concerned and generally after submitting them with full explana-
tions to the Consumers Council—a body appointed by Lord
Rhondda to represent the consumers’ interests—would be em-
bodied in a formal Order and receive statutory authority.

An important feature of this machinery was that the detailed
investigations were conducted by professional men who were not
interested in trade. Many of the executive officials in the Supply
Departments were business men who had temporarily severed their
connexion with their private business, but were looking forward
to resuming it as soon as possible. It was therefore the rule that
information obtained under compulsory powers as to the standing
and financial position of private firms should be treated by the
Costings Department as confidential and not supplied to members
of the Supply Departments, many of whom might be competitors
in the same trade.

The statutory powers under which compulsory investigation
of costs was authorized were conferred by Regulations 7, 15 c and
26. Regulation 2¢, which was the most comprehensive and
explicit, runs as follows :

(1) The Food Controller may require persons engaged in the production,
manufacture, purchase, sale, distribution, transport, storage, or shipment
of any article to which the powers of the Food Controller extend, to make
returns giving such particulars as to their business as may be specified
by or on behalf of the Food Controller and may require the returns to be
verified as he may direct.

(2) For the purpose of testing the accuracy of any return made to the
Food Controller under this regulation, or of obtaining information in case
of a failure to make a return, any officer of the Food Controller authorized
in that behalf by the Food Controller may enter any premises belonging
to or in the occupation of the person making or who has failed to make
the return, or on which he has reason to believe that any articles with
respect to which an order under this regulation has been made are kept
stored, manufactured, or produced, and may carry out such inspection
and examination (including the inspecting and examination of books)
as the officer may consider necessary for testing the accuracy of the return
or for obtaining any such information.

320 COMPARATIVE STUDIES

(3) If any person :

(a) refuses or without lawful excuse neglects to make a return as
required by this regulation to the best of his knowledge and belief,
or makes or causes to be made a false return ; or

(b) obstructs or impedes an officer of the Food Controller in the
exercise of any of his powers under this regulation ; or

(c) refuses to answer or gives a false answer to any question or
refuses to produce any books or documents required for obtaining the
information to be furnished in pursuance of this regulation ;

that person shall be guilty of a summary offence against these regulations.

A typical example of the instructions issued to District Super-
vising Accountants is given in Appendix 13, which has already been
referred to in the account of Oils and Fats control. A few points
of definition, which arise out of this document, require a brief
commentary.

So far as possible the regular principles and methods of cost
accounting were observed. In particular a strict distinction was
made between items chargeable to ‘Costs’ and items falling
properly under the heading ‘ Allocation of profits’. For example,
Income Tax and Excess Profits Duty, interest on capital, loans
and debentures, remuneration of directors, management expenses,
donations, subscriptions, and advertisements are all items falling
under the heading ‘Allocation of profits’, and were either excluded
altogether from statements of cost or referred to separately. All
items which an accountant would pass in an audit as capital
expenditure, such as expenses of raising capital, commission on
issue of debentures, or addition of new plant would be excluded
altogether. One reason why manufacturers’ and traders’ estimates
of costs were generally higher than the Ministry’s calculations was
that they worked on a different interpretation of the term and
included items which were allowed for in fixing a reasonable rate
of profit, but were not included in costs.

Some charges would be heavier in normal times than under
control, especially advertising and certain selling and distributing
expenses such as commissions, fees, and expensive packages.
These were no longer necessary or at any rate important items
under control, and were therefore cut down or disregarded alto-
gether. Two other factors worked in favour of many manufac-
turers. First, a larger and more uniform turnover, as in the

THE COSTINGS SYSTEM 321

manufacture of khaki cloth, meant a considerable saving in
over-head charges; and secondly, absence of competition and
guaranteed sales at fixed prices practically eliminated all risk
of bad debts and trading losses, both of which are in normal times
a charge against profits. On the other hand, in many cases
a substantial decrease in turnover resulted from war conditions
and the abolition of inter-trading ; and the general rise in prices
made a strict application of the pre-war standard of profit un-
reasonable, especially where it was interpreted not as a percentage
but as a fixed figure per unit handled.

Different methods had to be evolved to deal with these varying
circumstances. Thus in the case of margarine manufacturers,
prices were based on a fair return on capital rather than on pre-war
profit, owing to the fact that increased production involving high
capital expenditure had to be encouraged. Again, allowances
were made in the case of small grocers and other retail traders in
order to cover the increased cost of living, which fell on working
proprietors equally with the rest of the community. In some
cases a sliding scale of remuneration was found possible, which
made allowances for variations in turnover. Broadly speaking,
however, prices and margins under the costings system had to be
fixed rather above what the average costs would have justified,
so that the smaller businesses might be kept going. Prices and
profits could only have been reduced still further by a radical
reorganization of trade and industry, whereby the small business
would have been eliminated. But the policy of the Government
was to interfere with normal trade organization as little as possible,
and under such circumstances the granting of a rather more
generous margin of profit to the larger and more efficient businesses
was inevitable. This point will emerge more clearly from the
discussion of general principles.

General principles

According to economic theory prices tend under normal
conditions to approximate to the cost of production of the marginal
producer. For if the demand is such that prices rise considerably
above the marginal cost of production, fresh capital will be

1569.53 Y

322 COMPARATIVE STUDIES

attracted into the business, the supply will be increased, and
competition will force prices down. On the other hand, if the
supply at a price which just covers the cost of production of the
least efficient factory or plant is in excess of the demand at that
price, competition will reduce the price below the cost of produc-
tion of the least efficient unit, which will then be forced out of
business. Equilibrium is reached when the price which the
marginal consumer is willing to pay corresponds with the price
which will just pay the marginal producer to keep his factory
working. In practice the theory rarely works out as simply as
this ; economic laws are only economic tendencies and generally
have to be qualified by the phrase ‘in the long run’. In normal
times, however, and under conditions of free competition, prices
do tend to approximate to the cost of production of the least
efficient or least fortunately placed unit of production. Cost of
production in this sense includes a minimum return on the capital
employed or a living wage for the individual entrepreneur—items
which, it should be noted, are excluded from the strict definition
of costs by cost accountants. When prices are much above this
level, conditions are abnormal; producers are able to squeeze
consumers and profiteering takes place.

During the war conditions were such as to put producers and
traders in a peculiarly favourable position. The demands of the
Government, often on an unprecedented scale, were added to the
demands of the civilian trade; and though in a very long run
the supply might have been stimulated to such an extent as to
bring about a new equilibrium, for the time being and with a short
war in prospect, such an increase was impossible. Fresh capital
and fresh factories (except where they were expressly provided for
war purposes by Government intervention) were not likely to
spring up quickly enough to overtake the ever-growing demand.
Competition between producers was for the time being in abeyance,
and the least efficient marginal producer found himself no longer
on the bare subsistence level but in a position where he was able to
obtain a large economic rent. This phenomenon was most apparent
where the supply was relatively inelastic, or in the phraseology of
war controls, where there existed a ‘ bottle-neck ’ which limited
the flow of supply and could not be rapidly expanded; wool-

THE COSTINGS SYSTEM 323

combing, jute spinning, and maritime transport are examples of
such bottle-necks.

To have allowed full advantage to be taken of these abnormal
conditions would have had two disastrous results. In the first
place, it would have involved far greater inflation ; this, as painful
experience has shown us, is the worst form of indirect taxation,
falling most heavily on the poor and involving a huge transference
of wealth from creditors to debtors and from the small man with
savings invested in fixed-interest-bearing securities to the share-
holder and the wealthy entrepreneur. In the second place, the
free play of supply and demand under a régime of competitive
prices would have seriously hampered, if not indeed paralysed, the
prosecution of the war. Without control of imports and distribu-
tion at the most critical stages of the war, Great Britain might
well have been forced to surrender owing to a shortage either of
food or of munitions. Some limitation of profiteering and freedom
of contract was therefore essential from motives of sheer self-
preservation.

Owing to the misleading implications of the term ‘ Costings
system ’, there is a popular impression that all that was necessary
to stop profiteering was to ascertain costs and fix prices accord-
ingly. The story outlined in this book shows that the mere fixing
of prices by statutory order was quite insufficient in itself. The
economic system could not be transformed by a stroke of the pen.
Before costing and price-fixing could usefully be applied, elaborate
preparation of the ground was necessary and various novel
expedients in centralization and co-ordination had to be put into
force. The problem differed according to circumstances.

There is first the distinction pointed out in an earlier chapter
between the application of costings and fixed prices to commodities
required by the Government and to articles required for civilian
consumption. For the former, wholesale and retail distribution
of the finished products presented no difficulty ; distribution took
place through the Army Service Corps and the Army Ordnance
Depots. Goods for civilian consumption, however, had to be made
to flow smoothly and regularly through wholesalers’ and dealers’
stores into a hundred thousand retail shops. The major problem
therefore was to regulate supplies and distribution. With fixed

¥2

34 COMPARATIVE STUDIES

prices, supply and distribution could not be left to take care of
themselves ; for without the automatic regulator of price fluctua-
tions goods would stagnate near the source of production, or flow
unevenly as chance or favouritism might determine.

Again, the problem varied according to the class of trader
dealt with. Costing might be applied to determine either a fair
margin or a commission for services rendered. Thus an importer
of food or raw material, under Government control, generally
became an agent employed on commission. The prime cost of the
material purchased, including freight and insurance, fell on the
Government ; but the commission, which was usually expressed
as a fixed sum per ton handled, had to be fixed according to the
expenses of the agent firm and the amount of work done. If the
importer had a branch in a foreign country and bought on Govern-
ment account from the foreign producer, as in wheat, hemp, flax,
and a number of other commodities, the commission had to be
calculated after an examination of the establishment charges and
working expenses of the foreign branch and of the head office in
London. A wholesaler might have nothing more than an office
to keep up and certain clerical expenses, or he might have a
warehouse in which he would sort, pack, store, blend, or otherwise
treat the commodities entrusted to him. In such cases costings
would be applied to determine the average cost per ton of the
commodity handled, which these services represented. Retail
traders were in a category by themselves. Here the expenses were
mainly represented by the upkeep of the shop and the salaries
of employees, but the margin had also to provide for a fair return
on capital or remuneration for the shopkeeper. These depended
largely on the amount and rate of the turnover, and great diffi-
culty was experienced in apportioning a fair margin for different
commodities dealt in by the same shop and for many different
shops varying in size and turnover.

In the case of manufacturers the costings system might either
be used to determine a fair charge for performing a definite
service, such as sewing bags, combing tops, or treating in any other
way an article which remained the property of the Government ;
or more frequently, the object would be to determine a fair
margin or “conversion cost’, which, when added to the price

THE COSTINGS SYSTEM 325

paid for the raw material or semi-manufactured article, would
represent the selling price which the manufacturer was entitled
to receive. This, combined with organized supply of the raw
material at fixed prices, was the device applied to jute and linen
goods, wool textiles, boots, oils and fats, and other materials.
The system is treated more fully in Chapter XXVII. Lastly,
there was the application of costings to farm produce, which was
the most difficult of all. The preparation and analysis of agri-
cultural costs need not merely skilled accountancy but a high
degree of organization on the farm, and farms in this country
which can boast of either are rare. Agricultural costing and
price fixing will be considered in the next chapter.

The costings system, therefore, was no simple, cut and dried,
solution; nor was it an exact science. The extent and success of
its application varied enormously. Accurate costs were not always
obtainable, and where they were obtained they could seldom be
generalized or taken as an infallible guide, especially in agriculture.
The merit of the system was that it upheld a principle and pointed
to an ideal standard. The fact that the standard could rarely be
strictly applied did not render it useless; for a rough measure
is better than none at all. 3

An objection to the costings system which gained currency
after the war is that it allowed the most efficient or the most
favourably placed firm to obtain excessive profits. Since maximum
prices were so determined as to give the least efficient firm enough
to cover cost and a fair profit, the better organized units natur-
ally obtained a larger profit. Maximum prices, it is argued, must
always be extravagantly high for the majority of firms, just
because they must be fair for the minority. It is then sometimes
implied or assumed that without maximum prices this state of
affairs would have disappeared and that the best firms would no
longer have been able to earn a big premium over their smaller
rivals.

This criticism is worth examining. It is of course true that
a system of control suspends competition, and that if general
conditions, apart from the existence of control, were such as to
stimulate an immediate increase in supply leading to competition
between producers and merchants, the application of the costing

326 COMPARATIVE STUDIES

principle would tend to prevent prices falling to the extent which
they would otherwise do. This is a very different proposition,
however, from the implication sometimes made that control
necessarily yielded higher profits to the best firms than the free
play of market forces.

The difference between the profits of the efficient and the
inefficient unit of production is a familiar fact to which economic
theory gives the name of differential rent. In normal times prices
correspond not with the cost of production of the most efficient
firm, but with that of the least efficient. Since prices in the open
market tend to equalize themselves (subject only to slight differ-
ences due to expenses of transport), the best firm selling at the
highest price obtainable, which is that which the least efficient
firm will just find it worth his while to accept, is bound to make
a bigger profit. The position is therefore much the same under
control and under normal conditions. In both cases a higher profit
may be earned by the most efficient and favourably placed unit
of production. What control did was to stabilize this state of
affairs, and suspend the process by which in many trades the
inefficient unit is continually being depressed below the level at
which it pays to carry on. But during the war and for a year or
so after, this process was suspended not so much by control, as by
the exceptional conditions which governed the relations of supply
and demand.

This leads to a second qualification. But for control the profits
of the most efficient firms during the war would have been greater
and not smaller. Control effected a general scaling down of
profits. It still allowed the best firms to reap the advantage of
a differential rent, but it prevented the whole trade from reaping
monopoly profits, which in the absence of competition and the
excess of effective demand over supply would otherwise have been
inevitable. .

Lastly, it is worth noting that control of prices by reference
to cost and fair profit need not necessarily be based on the cost of
production of the least efficient unit of production. Indeed, it is
truer to say that the investigation of costs was designed to bring
out the average rather than the highest cost. It was the average
cost of the normally equipped firm that-was generally taken as

THE COSTINGS SYSTEM B27

the datum line in negotiations between the Government and the
trade of industry concerned. But since the relative efficiency of
different firms resembles rather a few peaks standing out of a
level plain than a large number of peaks and valleys, the average
so reached no doubt approximated in point of fact nearer to the
general dead level than to the few outstanding exceptions. Cases
of very low efficiency could sometimes be ignored or treated
separately by a system of special allowances.

Nothing illustrates the extraordinary extent to which compe-
tition is in fact limited in operation throughout trade and industry
than the striking divergence between the costs of production of
different firms engaged in the same processes. According to
economic theory the competition of producers should be constantly
tending to drive the inefficient out of production. To the extent ©
to which this tendency does not operate, the economists say that
friction exists. But friction of one kind or another would almost
seem to be a more important feature of the economic system than
free competition. Some day the economists will have to analyse
the laws of friction to supplement the laws of supply and demand,
and construct an economics in which combination, inertia, and
vested interests provide the rule, and competition and individual
enterprise the exception. In many trades and industries, even
with the qualification ‘ in the long run’ added, such a topsy-turvy
theory of political economy might give a truer picture.

Striking illustrations of the extent to which differential rent
due to inertia or friction or lack of enterprise abounds, are to be
found in many of the trades and industries which were ‘ costed ’
during the war. Thus, for example, in the baking trade the cost
of converting a sack of flour into bread was found to vary during
the war from 8s. a sack in an up-to-date steam bakery to 25s. a sack
and over in the inefficient bakeries. In the spinning of worsted
yarn, where the method of production is more homogeneous and
uniform than in steam-baking and hand-baking, the same price
of yarn was found to give 2d. a lb. profit to one firm and 9d. a lb.
profit to another firm. That these big differences should be possible
after economic tendencies have been at work for many years
suggests a puzzling question. Why is it that when there is no
combination to keep up prices and competition might be expected

B28 COMPARATIVE STUDIES

to.drive out the inefficient and reduce costs to a fairly even level,
there should exist such big differences in the cost of similar
processes ? In the case of coal-mining and farming, convenience
of working and the nature of the soil supply a large part of the
answer. But in processes which merely demand up-to-date plant,
enterprise and good management to produce the conditions
favourable to low cost, the answer must explain why there is such
a large amount of old-fashioned and uneconomical plant, such lack
of enterprise, and such unscientific management. The inquiry
might perhaps lead to a reconsideration of some of the funda-
mental assumptions of political economy, which are still too much
influenced by the crude psychology of the early nineteenth
century.

One explanation, perhaps, of the survival of the unfit is that
they protect the strong from the charge of exploitation. In the
milk trade it was ascertained during the war that a large and
efficient firm could handle and distribute milk so much more
economically than the ordinary small retailer that it could afford
to sell milk at 2d. per gallon cheaper, if it chose to compete. But
if it did, it would crush the small firm out of existence. Such a step
might well be avoided not only on compassionate grounds, but
because of the popular indignation which would almost certainly
be aroused by methods judged more appropriate to an American
Trust than to the ‘ live-and-let-live’ principles of British trade.
The survival of the unfit meant in this case a differential rent of
hundreds of thousands of pounds per annum, which if all the unfit
had been eliminated would have become undisguised monopoly
profits.

It has been said that there was no reason why the costings
system should necessarily have been based on the cost of the
least efficient firm. Reflection on the principles involved was
bound to suggest the possibility of so reorganizing the trade or
the industry as to avoid this necessity. Two main methods were
indicated: the first is that known as ‘ pooling’, the second is
unification. These methods, as discussions on the future of the
coal-mines have taught everybody, are very different. Pooling
means making use of each unit of production as it stands and
averaging out the costs and profits by payments into and out of

THE COSTINGS SYSTEM 329

a central pool. The least efficient firm is thus subsidized by the
more efficient ; the differential rent earned by the more fortunate
and better organized is used to give bounties to the less fortunate
and worse organized. Unification, by whatever method it is
brought about, means closing down the inefficient and uneconon:i-
cal and concentrating production in the well-equipped plant or
factory. Pooling involves no change in the management, turnover,
or ownership of each firm; unification is generally supposed to
involve change of ownership. In coal-mining, for example,
unification would take place most simply by creating a single
Trust or Statutory Authority. But in distributing trades the
actual identity of each firm need not be lost; under control,
schemes of unification were brought about which disappeared with
decontrol, when each firm resumed its former independence. The
most striking illustration of unification in the distributing trades
is the Smithfield Control Board.

The possibilities and difficulties of pooling and unification as
applied to manufacturing concerns will be discussed in a later chap-
ter. It is sufficient here to recall the discussions in Chapter XVII
on the abortive proposal to form an effective Oilseed Crushers
Association. The earliest plan, it will be remembered, was in
the nature of a pooling arrangement. The crushers’ margin was
to be based on a high standard of efficiency sufficient to allow
a reasonable profit to the well-equipped mill. Any firm falling
below this standard and unable to make ends meet at the fixed
prices was to have a right to appeal for special consideration.
The next plan was called the Profit Equalization Scheme. This
differed from the sort of pooling which involves paying subsidies
to keep the inefficient working, since it expressly provided for
concentration of production at the most economical mills and the
temporary closing of the less economical. It approximated more
to the principle of unification, but involved no change of owner-
ship. Lastly, there was the plan which was discussed but never
bore fruit of bringing about a compulsory unification of the whole
industry whereby the inefficient mills would have been bought
up and closed down.

In the marketing of agricultural produce the chief cause of
differential rent is proximity to the market. In normal times

330 COMPARATIVE STUDIES

this means that the cost of transport over long distances is borne
by the producer, or by the land-owner, who has to take a lower
rent for his land. Under control, as exemplified in meat and wool,
cost of transport was pooled, and farmers received the same price
for their produce all over Great Britain. This new departure,
though it involved a complete change from normal conditions,
was never questioned by agricultural representatives on the ground
of injustice. In the case of milk, potatoes, and certain other
commodities, where expenses of transport were not pooled,
differential prices were fixed to meet variations in local conditions,
among which certain items in the cost of production, such as the
fertility of the soil or the system of farming, played an important
part. The costings system in such cases did not involve a uniform
fixed price based on the highest cost of the least efficient unit, but
was elastic enough to permit differences.

These three applications of the costings system, to agriculture,
to manufacture, and to wholesale distribution, will be discussed
in the following chapters.

CHAPTER XXVI
CONTROL OF AGRICULTURAL PRODUCE

Contrast between Germany and Britain — Difficulty of controlling domestic
produce — The balance of prices — Contrast with control of manufacture —
Application of costings to agriculture — A new science — Differential or uniform
prices — Maximum and minimum prices — Methods of subsidizing — Effects
of price control — Advantages of guaranteed price.

Methods of marketing — Little combination or co-operation before the war —
Centralization necessary for control— Comparison of methods — Relations
between Government and farmers — Advisory Committees — Agricultural
Council — Parliament.

Valuation and grading — Fixed prices and different qualities — Gresham’s
law applied to commodities —- Improved methods of standardization — Grading
of milk.

OnE of the contrasts between State control in Great Britain
and Germany was that whereas in Germany most raw materials
and nearly all foodstuffs were produced at home and imported
supplies were negligible, in Great Britain the greater part of the
principal raw materials, except coal and iron ore, and four-fifths
of the foodstuffs required were imported from abroad. Though
this fact made Great Britain’s staying power more precarious
owing to the submarine peril, it made the problem of controlling
supply, price, and distribution much easier. In judging the
comparative efficiency of the two systems of food control, this
advantage which the British Food Controller enjoyed must not
be overlooked. The control of domestic agricultural produce
proved much the most difficult part of Lord Rhondda’s task.
Certain schemes, such as the various attempts to establish control
of pigs, were admitted to be failures ; others, such as the control
of eggs and home-produced butter, only partially succeeded ; and
in the case of many commodities from poultry to fresh vegetables
(excluding potatoes) no thorough scheme for controlling supply
and distribution was ever attempted. In other commodities,
which were successfully controlled, such as wool and meat, the
organization established was of a more elaborate character than
even Germany produced. Judging from German accounts it

332 COMPARATIVE STUDIES

appears that control of live stock was actually more thorough
and efficient in Great Britain than in Germany.

The two chief difficulties encountered in controlling agri-
cultural produce were, first, the question of price, and secondly,
the machinery of marketing. These will be dealt with as far as
possible separately.

Price-fixing

In dealing with agricultural produce the question of price was
fundamental. With merchants and manufacturers price-fixing
resolved itself into a question of determining a fair margin for the
performance of certain services. Merchants and manufacturers
had to make the best terms they could and then carry on; it was
practically impossible for them suddenly to give up their usual
line of business, when it had. become less profitable than some
uncontrolled occupation. Their experience and plant were
highly specialized. Their services could in the last resort be
requisitioned, and they could then be instructed in detail what
functions they should perform. Moreover, in most trades and
industries the number of merchants and manufacturers was
a manageable quantity ; each was subject to some degree of
individual supervision. Farmers were in a quite different category.
As the German war-proverb has it, “ You cannot have a policeman
for every cow.’ Not only was the number of farmers too great for
effective supervision (though the County Agricultural Committees
of the Food Production Department did something to bring
home individual responsibility in cases of bad cultivation) ; but
the variety of agricultural products, some of which are comple-
mentary, others alternative, rendered any price-fixing policy
extremely complicated. A farmer who finds it does not pay him
to produce milk will slaughter his dairy herds; or if he finds
pig-breeding profitable, he will keep his barley and milk and feed
them to his pigs. The price of bacon has a close relation to the
price of barley ; supplies of butter and cheese vary inversely with
the price of milk. Agricultural production is thus extremely
sensitive to price-fixing. Too low a price may drive the commodity
off the market and divert production into other channels. The
time-element, too, is important. The prospect of a fall in prices in

CONTROL OF AGRICULTURAL PRODUCE 333

the near future will cause an immediate glut, as occurred with
cattle and sheep in the autumn of 1917; and the announcement
of a future rise may lead to an instant scarcity. Unlike the output
of a factory, farm produce comes to market irregularly ; the
exact date when a beast is sent for slaughter depends on the
weather, on the farmer’s convenience or caprice, or on the price
of feeding-stuffs. Fat cattle are not ‘ finished ’ for sale like pieces
of cloth. There are physiological and psychological factors
governing the production of milk and butter, which do not arise
in the manufacture of margarine or the brewing of beer. Milk
and butter depend on the health of the cow and the psychology
of the farmer; beer and margarine on the efficiency of machines.
Food control did not affect the machines ; but it might seriously
upset both the farmer and his cow.

During the war the farmer was placed in the same position
as producers of other essential commodities ; he was able to take
advantage of the market to make profits on a larger scale than
usual. Popularly this was called ‘ profiteering’; but the word
suggests. a deliberate intention and a power of manipulating
prices, which the farmer perhaps least of any one possessed. The
farmer can no more avoid making excessive profits when buyers
outbid one another for his produce, than he can avoid making
heavy losses when the market turns against him. But the fact
of high profits remained and was aggravated in the farmer’s case
by the fact that he was not subject to Excess Profits Duty. It
was inevitable, therefore, that an attempt should be made to
limit his profits by the application of the * costings system ’.

Here, however, practically insuperable obstacles were en-
countered. In the first place, a small minority only of British
farmers keep proper accounts; compared with peasants in
Continental countries the proportion may be favourable, but
compared with manufacturers the farmer’s accounting methods
are notoriously deficient. There were thus few data available.
The study of agricultural costings is a comparatively recent
science. A few scientific farmers throughout the country had
for two or three years before the war sent detailed cost sheets to
the School of Rural Economy at Oxford, which had done much to
stimulate the collection and comparative study of such statistics.

334 COMPARATIVE STUDIES

But apart from this and other similar work on a limited scale, no
figures as to costs could be obtained which were anything better
than guess-work or ea parte statements. In the second place, the
analysis of farming costs presents great technical difficulty. So
many of the items in the cost sheet are materials both produced
and consumed on the farm that it is almost impossible to assign
a correct value to them. To apportion the cost between a number
of associated products, or between a main product and its by-
products, is bound to be more or less arbitrary. The cost of pro-
ducing wool cannot be disentangled from the cost of producing
mutton. The most that can be hoped for is the cost of producing
sheep. But this will depend whether the calculator takes turnips,
for example, at their cost price in the market, or at their estimated
cost of production on the farm. Again, in estimating the cost of
production of a bullock, credit must be taken for the manure
produced. But to estimate the value of manure at the market
price at which it occasionally changes hands would give it a ficti-
tious importance. Is the rental value of the pasture on which
dairy cows are fed an element in cost ? Or is the rental value of
the farm chargeable, not to costs, but to profits ? These and other
conundrums render any exact calculation of agricultural costings
a matter of higher mathematics rather than of practical politics.
In price-fixing negotiations, therefore, the costings principle was
used not to arrive at a mathematically accurate figure, but as
a guide to determine the proportionate increase over pre-war
prices, which appeared to be justified by increases in specified
items, such as wages, fertilizers, or feeding-stuffs. All that was
necessary was to get a rough idea of the proportion which these
elements bore to the total cost of production. For example,
wages were a less important influence in the cost of producing
sheep than in the cost of producing wheat. The cost of production
of milk depended largely on the extent to which artificial feeding-
stuffs had to be used to supplement pasture. In this case the
greatest variety existed on different farms and in different
districts ; so much so that differential prices had to be fixed,
based on local variations in the estimated cost of production.

In spite of these difficulties the application of cost accounting
to agriculture received a great stimulus from the war. Towards

CONTROL OF AGRICULTURAL PRODUCE 335

the end of the war an Agricultural Costings Committee was
appointed under the joint auspices of the Ministry of Food and the
Board of Agriculture, the objects of which were to advise the Food
Controller on current agricultural price policy and to give official
support and encouragement to the development of a new branch
of agricultural research which would be of permanent value to
farmers. The commodities whose costs of production were studied
with most care and profit during the war were wheat and milk.
In both cases the vital importance of securing the maximum pro-
duction made it essential, first, that the prices fixed amply covered
the cost of production, and secondly, that sufficient inducement
was left by way of profit to make sure that farmers would not
give up producing them for the sake of some more remunerative
line. This end was achieved partly by allowing a generous margin
over and above bare cost, and partly by deliberately depressing the
prices of rival products. For example, the relatively low prices
fixed for cattle and sheep for slaughter and their by-products hides
and wool, gave a negative inducement to dairy farming and arable
farming. High prices for slaughter cattle would have encouraged
the slaughter of dairy herds. Similarly the production of butter
was deliberately discouraged by fixing a low and comparatively
unremunerative price, in order to secure the maximum supply of
fresh milk for infants.

Reference has been made to the fact that differential prices
varying with local conditions were fixed for milk. To have fixed
the general level of milk prices on the basis of the highest cost of
production, which is that of the town dairy where stall-fed cows
are kept and fed almost entirely on artificial feeding-stuffs, would
have given an unreasonable profit to the vast majority of dairy
farmers, especially in the rich pasture lands of the Midlands and
the West of England. But the policy of varying local prices was
difficult to apply. To draw any hard and fast line between two
neighbouring districts and give farmer A on one side of the line
a different price from farmer B a mile away on the other side
is an arbitrary proceeding which is hard to justify to aggrieved
individuals. In the milk business it was rendered easier by the
organization of milk distribution. For the most part milk is
bought either direct from the farms by local retailers or by large

336 COMPARATIVE STUDIES

wholesale and retail traders for consumption in the towns. In the
former case retail prices were fixed by the Local Food Committees
and where conditions were favourable a differential price could be
fixed for all the milk supplied locally to the area. Milk bought
by large wholesalers, like the United Dairies Limited, could be
bought at different prices in different areas without causing
inconvenience, since all their supplies would be pooled and sold
at a uniform price in London and elsewhere. In most commodities,
however, it was found more convenient and more generally
acceptable to fix a uniform price to farmers throughout the
country. Thus the prices of wool, cattle, and sheep were fixed
at the same figure for the same grade irrespective of the distance
of the farm from the centres of population. Cattle and sheep had
indeed to be driven to the nearest country market to earn their
full price, but no allowance was made for the distance they had to
travel by rail to the London market. Agricultural representatives
accepted this reversal of normal conditions without question.
No complaint was received from farmers near London on the
ground that under the fixed-price régime they received no more
than the farmers in the north of Scotland; and yet in normal
times the carcass of a Scotch heifer sells for the same price at
Smithfield as that of a beast from East Anglia, and the more
distant farmer has to bear the extra cost of transport. In the
case of meat the two conflicting principles of a uniform price to
farmers and a uniform price to consumers led to the establishment
of a central pool for averaging out intermediate expenses—
a solution of the price problem which is referred to in the chapter
on distribution.

A further point to note in connexion with agricultural price
policy is that the prices fixed were in all the more important cases
guaranteed prices. They were neither maximum nor minimum,
but both. This is an important distinction. Maximum prices
mean that no buyer may legally pay more, but there is nothing
to prevent him paying less if the state of the market justifies it.
An example of this occurred in the oilseed market in the early
days of control, when the maximum prices fixed by the Ministry
of Munitions were for a time above the level of prices ruling in the
open market. A similar state of affairs prevailed from time to

CONTROL OF AGRICULTURAL PRODUCE 337

time in the wholesale fish market ; an exceptionally large catch
might depress prices below the statutory maximum. A maximum
price which is not effective or only partially effective leaves supply
and demand free to adjust themselves, and, so long as these con-
ditions continue, distribution may be left to take care of itself.
Maximum prices as such, therefore, do not necessarily upset
distribution. A fixed minimum price in the same way may have
no effect if the relations of supply and demand are such as to cause
market prices to rise above the minimum. This was the case with
the Government’s guaranteed price of wheat during a few months
after the war, when the general level of wheat prices at which
the Royal Commission on Wheat Supplies was selling rose above
the guaranteed minimum. In such cases the effect of the
guaranteed minimum is merely psychological ; if it is announced
at the time of sowing, when the future course of prices is uncertain,
it gives farmers a sense of security which will stimulate production.
But the effect of a statutory minimum price, when supplies are
in excess of demand at that price, is wholly to upset the normal
processes. You cannot compel a buyer to pay more for an article
than he can get for it; and if buyers and sellers both agree to
transactions below the minimum price, no amount of regulations
and prosecutions will prevent them. Maximum prices without
centralized purchase may dry up supplies; but minimum prices
without centralized purchase will dry up demand. In both cases
distribution will be irregular and subject to favouritism and
collusion between buyers and seller.

The difficulties of minimum prices are illustrated in the case
of potatoes and wheat. In 1917 the guaranteed minimum price
of £6 per ton for potatoes produced such a glut that the market
value fell much below it. When the slump in wheat prices started
in 1921 the Government’s guaranteed price to farmers stood higher
than the market level. In both cases recourse was had, in the
absence of any scheme of centralized purchase and distribution,
to the plan of paying each farmer the difference between the
market price at which he sold and the Government guaranteed
price. This involved administrative difficulties, and was bound
to cause dissatisfaction, delays, and disputes. The business of
dealing with hundreds of thousands of individual claims for

1569.53 z

338 COMPARATIVE STUDIES

payment of a bounty may well involve as much administrative
work, and certainly more complaints, than the direct method of
centralized purchase and resale. Meat prices also were for a time
subsidized by the Government, but this involved no payment of
bounty to farmers by the method of examining individual claims.
The Government merely instructed its agents to pay higher prices
to farmers and continue selling at the same prices as before, the
difference being met out of the Central Live Stock Fund, which
received a temporary overdraft from the Treasury, to be repaid
in later months. By centralized purchase and sale the temporary
subsidy could be recovered by passing it on to the consumer
at a later date through an advance in selling prices. Under
the bounty system this method of recovery was impossible,
and the whole of the bounty and its incidental costs fell on the
tax-payer.

The conclusion may therefore be drawn that a guaranteed
price which is both a minimum and a maximum is most simply
and economically administered bya system of centralized purchase,
distribution, and resale. The exact form of the monopoly is of
secondary importance. It might take the form of a purely
Governmental organization staffed by salaried officials like the
Army Forage Department of the War Office, which controlled
the greater part of the hay of the country ; or a nucleus of Govern-
ment officials employing a whole trade as agents on commission,
as in the wool and meat schemes; or a large combine like the
United Dairies Ltd., acting under Government control and super-
vision ; or a public monopoly specially constituted for the purpose
in the form of a limited liability company, like the German War
Companies. The essential pot was that there should be one
buying authority, a uniform schedule of buying prices, a uniform
schedule of selling prices, and a single financial pool for averaging
out costs and expenses of distribution and setting off profits
against losses.

There remains the question of the economic effect of this
agricultural price policy. It is sometimes argued that though
maximum prices for agricultural produce, if they are not fixed
below the cost of production and are applied without discrimina-
tion to rival products so that one is not favoured more than

CONTROL OF AGRICULTURAL PRODUCE 339

another, may not have any immediately depressing influence on
supply, yet in the long run any measure which limits abnormal
profits when supplies are short must exercise a depressing influence
on production. In The Political Economy of War Professor Pigou
puts the argument thus: ‘If the State adopted a general policy
of forbidding farmers to charge abnormally high prices when
there are bad world harvests, this would check investment in
agriculture ; because people expect bad world harvests from time
to time and look to high prices then to set against low prices in
bumper years. With price regulation limited to a single excep-
tional occasion, the position is, of course, quite different.’ The
argument so stated is doubtless valid, but it overlooks the fact
that the policy of controlling agricultural prices, so far as it was
adopted during the war, besides being designed to limit abnormal
profits, also aimed at stimulating production. The best incentive
to the farmer to extend his arable land, to increase his dairy herd,
or to grow more potatoes was not the chance of making very
large profits combined with an equal chance, if the war came to an
end or a glut occurred, of making a big loss; but the certainty
that he would make a reasonable profit whatever the state of the
market. This the system of guaranteed prices gave him. It was
in the nature of a scheme of compulsory insurance against bad
times. The farmer surrendered his chance of making excessive
profits as a premium against the risk of making big losses. How
far the system of guaranteeing prices for wheat, meat, dairy
produce, and other staple agricultural products on a national or
even on a world-wide scale would be practicable or beneficial in
normal times is a question which falls outside the scope of this
book. But the distinction between the depressing influence of
a moderate maximum price unaccompanied by any guaranteed
minimum, and the stimulating effect of a guaranteed ‘ fair ’ price,
which is both a maximum and a minimum, deserves more examina-
tion than it has received from economists. The recent movements
in Canada, Australia, New Zealand, and the United States for the
stabilization of agricultural prices by State action show that, at
any rate in times of depression, farmers see some advantages in
Government price-fixing as compared with the gamble of free
markets.
Zo

340 COMPARATIVE STUDIES

Marketing of agricultural produce

For many years before the war there was a growing disposition
amongst farmers throughout the world to supersede the traditional
mechanism of competitive trade in the disposal of farm products.
Two different tendencies were at work. On the one hand,
there was the growth of the agricultural co-operative movement,
which reached its highest development in countries where small-
scale farming was the rule, as in Denmark, Ireland, and parts of
Russia, and was specially developed among dairy farmers. On
the other hand, the local market and the small middlemen were
being progressively eliminated by bringing the ultimate consumer
into closer contact with the producer. This is illustrated in the
Colonial wool trade, where the large sheepbreeder would some-
times sell his wool in Australia direct to a Bradford manufacturer
or topmaker, or again would send his wool on consignment to the
central market of the world in London, for sale by auction to
British, American, French, German, Austrian, and Polish manu-
facturers. By these means the wasteful and expensive handling
of farm produce by a series of middlemen, large and small, was
slowly giving place to more direct and economical methods of sale.

In Great Britain, though the same tendencies were at work,
the war revealed how far behindhand the marketing of agri-
cultural produce stood compared with Denmark, Australia, or
New Zealand. The co-operative movement had never taken root
among English farmers, and the marketing arrangements had
advanced little since the days when the farmer’s market was the
parish or country town. The number of dealers and middlemen
was excessive ; only in milk had the process of consolidation and
organization in the wholesale trade made substantial progress.

The first condition of war-time control of agricultural produce
was that the whole of this business of collection and distribution
should be in the hands of a single large organization. There had
to be one plan, and a central organ for seeing that the plan was
carried out. To have had a number of different conflicting plans
with several different groups acting independently of one another
would have been absurd; but to have left the whole situation
to be dealt with by thousands of separate firms each acting on

CONTROL OF AGRICULTURAL PRODUCE 34d

their own initiative, with no knowledge of each other’s activities,
would have been still more unworkable. In the absence of a free
market, centralization was inevitable. Fixed prices could not
work without a comprehensive plan of distribution.

The precise form of the organization varied according to the
circumstances of each trade. The simplest course in each case
was naturally to make use of any large-scale organization already
in existence. Thus the large milk combine known as United
Dairies Ltd. immensely simplified the control of milk distribu-
tion, especially in London. In most agricultural products,
however, trusts and combinations do not exist; there is no
English meat trust or any effective combination of wool and grain
merchants, though spasmodic and temporary ‘ rings ’ are common
enough. Nor are agricultural products sold to any considerable
extent by farmers’ co-operative societies. If British farmers had
been organized on co-operative lines as completely as Danish and
New Zealand farmers, the problem of control would have been
more easily solved. English and Scottish farmers’ co-operative
societies might then have exercised control on behalf of the Govern-
ment, and instead of a bureaucratic organization imposed on
them from above, which farmers naturally found irksome and
oppressive, there would have been responsible self-government
in the marketing of agricultural products, tempered only by full
publicity as to costs and prices. It is significant that the Ministry
of Food tried to move in this direction by transforming its
own ‘ Government Slaughter-houses ’ into farmers’ co-operative
slaughter-houses administered by farmers on their own behalf.
Broadly speaking, however, the agricultural co-operative move-
ment was not strong enough to play a large part in the organiza-
tion of food control.

A comparison of the different methods of centralization
adopted shows that the * bottle-neck’ could be imposed at
various stages in the process of distribution from the producer
to the consumer. In the case of hay the Army as consumer had
its own Army Forage Department for buying at fixed prices direct
from the farmers. But the hides required for making Army sole
leather were controlled by a trade combination, the Tanners
Federation. By agreement with the Government the tanners of

342 COMPARATIVE STUDIES

the country, acting collectively, paid fixed prices to butchers for
their hides and received fixed prices for their leather. The
machinery of marketing went on as before, but there was virtually
a single buyer. Statistics of hides purchased were kept by the
Army Contracts Department and for many months these were the
only reliable statistics showing the rate of slaughter of cattle. If
there had existed in the woollen and worsted industries an organiza-
tion of spinners and topmakers comparable to the Tanners Federa-
tion in the leather industry, the necessity for direct State purchase of
British wool might have been avoided. As it was the individualism
of the manufacturers and the multiplicity of small dealers made
it necessary for the Government to step in as the sole buyer and
to organize the whole trade on agency terms. In milk the London
combine carried on as before but under Government supervision ;
the organization already existed ready to hand. In the corn trade
the * bottle-neck ’ was created in the milling industry ; under the
general control of the Ministry of Food the millers regulated the
purchase and distribution of wheat. Meat passes for the most
part direct from farmer to retailer, and even in the wholesale
trade there are no large combinations. The Government there-
fore had to intervene as the sole buyer, and either resell direct
to the retail butcher, or pass the meat on to Wholesale Meat Supply
Associations created by the Government for the purpose of serving
as its agents. In other commodities, such as pigs, no effective
centralized organization was established, with the result that
control of supplies and prices was never successfully enforced.
Butter was bought by Government agents, but no attempt was
made to centralize purchase of the whole of the domestic produc-
tion. Cheese was found more susceptible to control because the
trade was in the hands of a few large factors, who were appointed
Government agents.

The burden of organization thus fell to a large extent on
Government Departments in Whitehall. The agricultural and
commercial experts, who in Germany would have been directors
of national War Companies and in Russia would have constituted
the managing board of the Central Union of Co-operative Societies,
became in England temporary Government officials, exercising
their powers of organization for the same end and by similar

CONTROL OF AGRICULTURAL PRODUCE 343

means but in a different and perhaps less favourable atmosphere.
Even a farmer becomes a bureaucrat when he is employed by the
State, and soon becomes the target for criticism in Parliament
and the Press.

During the war the risk of failure owing to the unpopularity
of bureaucratic management had to be constantly borne in mind.
In dealing with farmers it was specially important. They would
submit without protest to the rigging of markets and to the
arbitrary price-fixing of ‘rings’, while the slightest interference
by the Government was liable to arouse suspicion and resentment.
This psychological difficulty was met to a large extent by giving
the elected representatives of the agricultural community every
opportunity of criticizing, suggesting, and sharing responsibility
on special Advisory Committees, which were set up as an integral
part of every scheme. In the Wool Purchase Scheme there were
local Advisory Committees in each area, and Central Advisory
Committees for England and Wales, for Scotland and for Ireland.
There were Live Stock Advisory Committees, Milk Advisory
Committees, Feeding-stuffs Committees, Potato Committees and
the rest, all dealing with problems of sale and distribution, in
which ordinarily the farmer has hardly any voice at all. Not only
did this system give the Government a large amount of valuable
unpaid assistance and advice, but it also gave agriculturists as
a body the feeling that they were co-operating on equal terms
and were helping to control not only themselves, but the wholesale
distributors and even the executive officials.

At the head of this hierarchy of representative Committees
was an important new body called the Agricultural Council, which
functioned as a deliberative and virtually as a legislative body on
agricultural matters. It was the rule that all Orders made by the
Food Controller affecting agriculture should be submitted before-
hand to the Agricultural Council for their criticism, approval, or
acquiescence. The necessity for and the nature of the measures
proposed would be explained to the Council, not by the Minister,
but by the executive official responsible for the administration
of the scheme. Once approved by the Agricultural Council the
Order would be submitted with the same detailed explanation
to the Consumers Council, a body composed of co-operators, labour

344 COMPARATIVE STUDIES

representatives and householders, and after - discussion and
approval would at once be issued. Occasionally the two Councils
differed, especially on the question of price. On one occasion the
question of milk prices was referred to a joint Committee of the
two Councils to thrash out between them. This procedure for
the time being replaced the ordinary machinery of Parliamentary
Government. The Food Controller had been given a free hand by
Parliament and was under no obligation to submit his Orders for
Parliamentary sanction. But his autocratic rule was tempered
by a form of representative government devised by himself to
give both expert assistance and popular support.

- The relations between Parliament and the Agricultural Council
were never defined; and it was not till after the war, when its
functions became less important, that Parliament gave the
Council statutory recognition. But their relations may be illus-
trated by an incident which occurred in the spring of 1918.
The House of Lords was debating in a critical and some-
what destructive manner the Food Controller’s proposals for
controlling the wholesale milk trade. The Minister in charge was
speaking from a brief supplied to him by the Food Ministry, but
not being the Minister of Food he was adopting an apologetic line
of defence which failed to satisfy his critics. It happened that at
the same time the Agricultural Council was also considering the
proposals and discussing them in detail with the Food Ministry’s
milk experts. While the Minister was still being cross-examined
in the House of Lords and finding it difficult to reply convincingly
to a number of points which were not in his brief, news came that
the Agricultural Council had approved the scheme. As soon as
the Minister announced this fact, the debate collapsed and the
hostile motion was withdrawn. If a body which had a better
claim to represent agricultural interests even than the House of
Lords was satisfied with the scheme, there was nothing further
to be said by their Lordships.

Grading and quality

The question of valuation has been dealt with in the description
of British wool purchase, and the same topic recurs in the account
of the grading system under the live stock organization. The
importance of standardization and scientific grading of agricultural

CONTROL OF AGRICULTURAL PRODUCE 345

products deserves greater space than can be devoted to it here.
Some of the developments initiated during the war, such as the
official seed-testing station and the grading of milk, in which
this country lagged far behind more progressive countries, have
been retained and have now received statutory authority. Nor
is there space to refer to the importance of a more adequate treat-
ment of quality in the teachings of economic science. It is not
merely currency that needs to possess homogeneity and cogniza-
bility. It is equally important, if valuation is to have any firm
objective basis, that other commodities, especially raw materials
and agricultural products, should be scientifically standardized
and officially graded. In the absence of proper discrimination of
qualities, trade becomes a matter of chance and even of trickery.
There is a sort of Gresham’s Law applicable to commodities,
according to which the quality expressed by the same customary
‘mark ’ constantly tends to deteriorate and become debased.
During the war the practical problem was, how could differ-
ences of quality be allowed for under a system of fixed prices ?
It has been pointed out in a previous chapter that it was easier
to administer differential prices for quality at the wholesale stage
than at the retail end. During the greater part of control im-
ported frozen meat was sold at the same price as home-killed
meat though they differ in quality. This was partly because the
meat ration was expressed in terms of money; but it was also
to prevent butchers making an illegitimate profit out of cus-
tomers who could not distinguish between the two. The only
satisfactory way of securing that the retailer sold the right
quality at the right price was to have the food made up in packets
and labelled, like margarine, or sold in bottles with the grade
marked on the lids, like milk. This could be done with canned
meats, but not with fresh meat or fish or potatoes. In buying
from the producer, however, if any recognized system of standard-
ization or grading existed under normal conditions, it could
be applied under official control; though where the determina-
tion had generally rested with the individual judgement of the
buyer, it was more difficult to convince the seller that this was
a fair system to continue under control. For instance, live
cattle and sheep are normally valued for slaughter according
to their estimated yield of dead meat, the estimate being formed

346 COMPARATIVE STUDIES

in the buyer’s own mind. Under control the estimation of the
yield was entrusted to a committee of three graders, who were
not always reliable or unanimous in their conclusions. The
Ministry of Food later tried to substitute individual experts for
the Grading Committees, but the change met with opposition.
The more scientific system of determining the value of beasts
after slaughter, or of wool after it had been cased, was adopted
wherever facilities existed; but there was a large number of
farmers who disliked this system, because it meant parting with
their property before being paid for it. Confidence in the new
system was only gradually established, as the merits of an objective
standard in place of individual judgement were realized.

The case of milk illustrates the working of differential prices
for quality under control in favourable contrast with the previous
state of affairs. Before the war milk, good and bad, was sold
indifferently as the same article. Subject only to the provisions
of the Foods and Drugs Acts, which laid down a minimum of fat
and amaximum of water, the quality of the milk sold might, and
did, vary enormously. Here Gresham’s Law was seen at work.
Indifferent milk and adulterated milk tended to drive out good
milk. There was no inducement for farmers to produce the best
quality, or for dairymen to handle it with scrupulous cleanliness
and honesty, since it commanded the same price as ordinary
commercial milk. Under control pure milk was recognized for
the first time as a national asset, and a special price was fixed
for Grade A milk, certified after official inspection to be of the
finest quality, and free from impurities and tubercular infection.
In many commodities differences of quality had to be ignored
under a system of fixed prices; the best home-killed meat was
sold at the same price as frozen meat. In milk, however, the
abolition of price competition rendered competition in quality
possible. With the introduction of official grading discrimination
in price for different qualities became possible, and the buyer was
for the first time able to distinguish between the pure and the less
pure. Under such conditions Gresham’s Law no longer applied,
and owing to Government intervention the contamination of
Grade A milk became as unprofitable as wee debasement of gold
sovereigns.

CHAPTER XXVII
CONTROL OF MANUFACTURE

Control of industry as part of wider problem — Gradual growth of unification
— Coilective agreements, control of raw materials, costings system, rationing
of raw materials and standardization of product — Application to civilian trade.

No interference with ownership or management of factories — Restrictions
on buying and selling — Similarity to Kartel system — Costing and transfer of
products at fixed prices — Similarity to vertical trust — Vertical combination
of horizontal associations in oils and fats — International combination —
Association not amalgamation of separate firms — Representative governing
bodies and advisory committees.

Limitation of profits and price-fixing simpler in manufacture than agriculture
—‘ Taking possession’ of factories and costings system compared — Problem
of securing efficiency and economy — Comparison with methods of trust — In-
ducements to economy retained — Competition in quality — Organized com-
petition and encouragement of initiative in large-scale organizations.

Contro. of manufacture, rather than control of industry, has
been chosen as the title of this chapter, since the problems nor-
mally associated with the latter phrase, that is, the relations of
labour and capital, the determination of wages, profit-sharing, and
joint control, are questions, so to speak, of domestic concern
inside the industry. Discussion of them takes for granted those
factors which fall rather within the sphere of commerce and
finance, such as demand and supply, prices, the nature of the
product, and the relations of the industry as a whole to the larger
field of national or international economy. This chapter is not
concerned with the internal politics of industry, since outside the
munitions trades State control did not greatly affect them. The
major part of control had reference to markets, prices, raw
materials, and the nature and distribution of the finished pro-
ducts ; not to labour conditions, the ownership of capital or the
technique of management. Control of manufacture is treated in
this chapter as part of the general problem of regulating prices
and production.

The key-note of industrial mobilization has been shown to be
unification. The unity was not indeed that of an industry in the
narrow sense of a group of manufacturers, but of an organic whole

348 COMPARATIVE STUDIES

comprising importers, dealers, manufacturers, wholesalers, and
retailers—all in fact, who were concerned with the production and
distribution of a single group of related products. But inside this
wider unity there were secondary groupings, among which the
manufacturers engaged in the various stages of production played
an essential part. In practice unification was only imperfectly
realized ; the logical lines of organization only emerged at the
end of a slow process of evolution and they came by devious and
divers paths.

The first stage, which has been traced in the opening chapters
of Part I, was the placing of large Government orders in bulk in
place of piecemeal individual tenders. This involved, to a greater
or less degree, some process of collective bargaining, either with
established Associations or with representative committees ap-
pointed for the purpose. The next stage opens with centralized
purchase of raw materials, either of the whole supply required for
military and civilian purposes, as in flax, or of the part needed for
Army requirements, as in jute. This led to the establishment
of a single office responsible for distributing raw material at fixed
prices, placing orders on the conversion cost basis, and apportion-
ing as fairly as possible both the burdens and the privileges of
Army contracts.

By this time an important change had taken place in the
relative attractions of Government and private orders. In normal
times and for the first few months of the war, Army contracts
were keenly sought after and were at least as profitable, if not
more profitable, than ordinary civilian trade. But when profits
on Government orders were cut down by the costings system, and
prices in the open market began to yield very high profits, manu-
facturers found private trade the more profitable of the two, and
those who had taken large Army contracts began to urge that the
burden of supplying the Government should be shared as fairly
as possible by all. The attempts made to satisfy this demand
extended the process of unification. The central office began to
accumulate detailed information of the output, plant, labour,
and technical capacity of each firm; and the representative
committees which advised the controlling department began to
exercise more responsible duties.

CONTROL OF MANUFACTURE 349

Finally, the need for drastic restrictions on civilian consump-
tion led to the gradual introduction in the field of private trade
of the methods which had been successfully applied to Army
requirements, namely, standardized qualities, fixed prices, and
limitation of profits by the costings system. In the woollen and
worsted industry the production of Standard Clothing was combined
with an attempt to give priority to the export trade, the whole
of the industry thus being organized for the threefold purpose
of supplying the Army, paying for imports by sales abroad, and
clothing the civilian population. The network of committees
and executive departments needed to carry through this degree
of centralized planning and control culminated in the Wool
Council or Board of Control, which became virtually a representa-
tive legislative body for the woollen and worsted industries. In
the trades dependent on the import of oilseeds and oils and fats,
unification took place on similar lines through the establish-
ment of controlled Associations, which regulated their own affairs
under the general supervision of, but without detailed interference
by, the controlling department at the Ministry of Food.

Two features in this process of unification may be noted. In
the first place there was never any question of interference in the
actual ownership or individual management of factories. Each
private firm or joint-stock company continued to function as
a separate unit. ‘Even where, as in the case of coal-mines or
flour-mills, the Government ‘took possession’ of the mines or
mills, the phrase did not imply any change of ownership; it
merely meant that the Government took financial responsibility
for the results of control and enjoyed the use of the plant for its
own ends. Ordinarily even taking possession of factories in this
limited sense was unnecessary. Control operated on the com-
mercial side of the business, in the selection and purchase of raw
materials, in the specification of the product, and in the price and
destination of the finished article. In exceptional cases it might
be necessary to require the owner of a factory to perform certain
work ; but the more usual procedure was to requisition the whole
or part of his output, supply him with the materials, specify the
nature and quality of the product, and give delivery orders for
its disposal. The essential characteristic was that the manu-

350 COMPARATIVE STUDIES

facturer was divested of individual responsibility for buying and
selling, but retained his individual responsibility for the technical
processes of manufacture and the running of his own plant. This
sort of unification corresponds to the ‘ kartel’ system with its
centralization of buying and selling, rather than to the combine
or trust system which involves unification of ownership and
management as well as of the processes of buying and selling.

The costings system and the transfer of products at fixed prices
suggests a second resemblance. At each stage of manufacture
from the raw material to the finished product prices were fixed
on the basis of conversion cost, not as in the kartel system on the
basis of what the relations of supply and demand will justify, or
the policy of the kartel may dictate. An interesting parallel
to this system of costing at each stage is found in the internal
mechanism of a ‘ vertical trust ’, that is, a combination of firms
reaching from the raw material, like coal and iron ore, right
through to the finished product in the form of tools, hardware,
or other retail goods. An engineering combine, for example,
may own its own coal-mine and its own steel-works ; an electrical
combine will have its own glass factory and its own wire factory,
and perhaps its own wholesale selling company for passing
on electric-light bulbs and other goods to the retailer. The con-
stituent parts of the electric-light bulb may be made in different
factories, but the intermediate products will be passed from one
factory to another, not on the basis of the price at which the same
product would be bought or sold in the open market, but on the
basis of the actual cost with a standard allowance for overhead
charges and return on the capital invested. If the process is
carried one step farther and the combination becomes powerful
enough to dictate the prices at which the retailer shall sell the
standardized product to the ultimate consumer, the resemblance
becomes still more complete, with the important difference that
whereas electric-light bulbs, tobacco, and soap will normally be sold
at prices which yield the highest profit, margarine, standard
clothing, and war-time boots were sold under control at prices
which gave less than the highest profit obtainable.

War-time control of industry thus has points of resemblance
both to the horizontal kartel and to the vertical trust. The logical

CONTROL OF MANUFACTURE 351

form of organization to which it approximated might be defined
as a vertical combination of horizontal associations. This came
nearest to being realized under the Oils and Fats Control of
the Ministry of Food, where the national synthesis consisted of
the following : the Oilseeds Supply Department, supervising the
purchase and import of raw material; the United Kingdom
Oilseeds Brokers Association, which handled the distribution of
seeds and oils; the United Kingdom Oilseed Crushers and Refiners
Association, covering the production of crude and refined oils ;
the Linseed Oil Consumers Association, which distributed linseed
oil among its members; the Soap Manufacturers Federation,
covering the production of soap and glycerine; the Margarine
Manufacturers Association, representing the production of mar-
garine; and the Margarine Clearing-house, which supervised the
distribution of margarine to retailers. Towards the end of the
war the essential unity of the whole organization, which had
hitherto found expression merely in the fact that there was a
single Oils and Fats Controller, was formally recognized by the
creation of a central Oils and Fats Council representing all the
various Committees and Associations and responsible for delibera-
ting upon questions of mutual and general interest, and for
advising the national representatives on the Inter-Allied Oilseeds
Executive on questions of international importance. For a few
months after the Armistice the deliberations of Allied merchants
and manufacturers on the Inter-Allied Oilseeds Executive on
such questions as the purchase of raw materials, prices, and the
distribution of products resembled in embryo the working of an
International Consortium for regulating the oils and fats trade
of the world. Though such an organization has never existed
before or since in these particular trades, it may be paralleled in
other commodities such as borax, steel rails, and glass bottles,
where international combinations for the regulation of markets
and prices were well established before the war.

It is worth emphasizing here that though it is true that
Government control was bound to encourage combinations,
since without some form of organic unity no common plan
and no common purpose could possibly be realized, these com-
binations rarely took the form of actual amalgamations. Control

302 COMPARATIVE STUDIES

would indeed have been simplified if amalgamation had been more
widely adopted. Problems of apportioning work, closing down
inefficient and inconvenient plant, rationing of raw materials,
and distribution of products would have thrown less work on
Government Departments if they could have been entrusted to
large-scale organizations already functioning as a single financial
unit. Questions of compensation and fair play as between rival
interests would not have arisen in dealing with a national trust.
But the combinations and associations promoted and made use
of by the Government were not of this kind. In most of the trades
which came under control individualism was still strong, and in
a few cases competition was carried almost to the length of
a personal vendetta between rival magnates. This explains why
the reaction to individualism has been so pronounced in this
country. During the war there was a temporary truce, com-
petition was suspended, and business men learnt the advantages
and to some extent the technique of organized co-operation.
But with the removal of control, at least in the textile trades and
in the oils and fats trades, the normal warfare of peace succeeded
to the abnormal truce of war.

The comparison between the organization of industry under
control and the organization of a huge private trust must not be
pressed too far. It is only a few features which are common to
both, and the development of large-scale combinations has not
yet gone far enough to provide a complete parallel. The present
tendency in private amalgamations is towards autocratic direction
by a single organizer or a small group of directors. Under control,
though the powers which could on paper be exercised by the
Government were despotic, in practice the Food Controller was
a constitutional monarch who could only govern with the support
and approval of the majority in any particular trade. The
voluntary co-operation of traders and manufacturers was at least
as important as the wide compulsory powers conferred by the
Defence of the Realm Act; but it was rarely found necessary or
possible to elaborate so complete a system of constitutional
government as that of the oils and fats trades, which has been
taken not as a typical but as an exceptional case. It remains
true, however, that all the innumerable Boards, Councils, Associa-

CONTROL OF MANUFACTURE 355

tions, and even Advisory Committees which were associated with
the work of the controlling Departments, functioned to some
extent as representative governing bodies of the trade or industry
concerned. Some of these bodies merely bargained and negotiated,
others advised on policy, some acted as courts of appeal for
disputes between traders or between the Government and indi-
vidual traders; others took on more definite administrative
functions such as the rationing of raw materials or the allocation
of orders; but all of them, even the least effective and most
ephemeral, shared some of the responsibility for the working of
control and contributed to the smoothness or friction with which it
was administered. They all illustrate to a greater or less degree
that limitation and devolution of power which alone made control
possible.

The different categories of representative bodies may be
roughly classified as follows :

‘1. Manufacturers’ Associations. Associations for some form of
mutual protection existed in nearly every industry ; the Scottish
flax industry has been noted as a rare exception in which no
manufacturers’ association existed before the war. The Whole-
sale Clothiers Association, the Belfast Flax Spinners Association,
and the Soap Manufacturers Federation are typical examples.
These bodies and their executive Committees acted primarily as
representative organs for negotiating agreed terms and collecting
and distributing information.

2. Advisory Committees. ‘These were generally appointed by
the controlling department, partly to negotiate agreed terms and
partly to give expert advice on policy and trade customs. The
early Advisory Committees in the woollen and worsted industries,
in the boot and leather industries, and in the oils and fats trades
are typical examples. Members were generally appointed on the
nomination of trade associations or for their prominent position
and influence in the industry.

3. Controlled Associations. The Associations established in the
oils and fats industries had a special constitution. They included
all firms in the industry, and their Memorandum and Articles of
Association defined their objects and powers as being concerned
with the administration of control, and provided for the general

1569.53 AQ

354 COMPARATIVE STUDIES

supervision of the Government in the internal affairs of the
Association.

4. Advisory Councils. In the oils and fats trade an Advisory
Council was appointed consisting of representatives nominated by
the various Advisory Committees and Associations to advise on
broad questions of policy which were of mutual concern to all
parties, including international questions.

5. Executive Boards and Committees. The Wool Control Board,
the Flax Control Board, the Cotton Control Board, and the Flour
Mills Control Committee are examples of representative governing
bodies exercising statutory powers delegated to them by the
Government.

Limitation of profits and price-fixing
For reasons already given in previous chapters, manufacture
was more easily susceptible to the application of the costings
system than agricultural production. The constituent items in
total cost were more readily analysed and, given a fairly constant
price for the raw material, the right price for the finished product
could usually be calculated without much difficulty by ascertaining
the conversion cost. The difficulty varied, however, in different
industries and with different processes. Where a simple process
of transformation or manipulation was applied to a single homo-
geneous raw material, like the sewing of cloth into bags or the
manufacture of tents out of canvas, costing was comparatively
simple. But where a number of different qualities of raw material
in varying quantities had to be blended, as in the spinning of
woollen yarn or the manufacture of margarine, exact costing was
more difficult. It was then necessary either to assume a certain
normal proportion between the constituent elements, or to lay
down a standard official specification, as in margarine. This led

to control of quality and inspection of the product.

_ Manufacture differs from agriculture, again, in the specializa-
tion of the factory compared with the farm. Different firms tend
to specialize in different processes ; there are therefore a number
of intermediate or semi-manufactured products which change
hands in the open market and are the subject of speculative buying
and selling by dealers and middlemen. On a farm the same degree

t

CONTROL OF MANUFACTURE 350

of specialization is impossible; ‘ mixed farming’ is the rule even
in the most primitive forms of agriculture. Animal manure, for
example, which is an essential raw material both for arable farming
and grazing stock, is obtained as a by-product on the farm ; it is
rarely bought outside except by horticulturists. Again, sheep-
breeders and dairy farmers grow their own root-crops and other
feeding-stuffs. Artificial feeding-stuffs and fertilizers are impor-
tant, but they are not so vital to a farmer as yarn is to a
weaving factory or oil to a margarine-maker. Control of manu-
factured products therefore involved control of intermediate
products at various stages, and this involved not only the applica-
tion of costings at a number of separate points in the whole
process, but difficult adjustments of price at each stage and some
system of rationing to take the place of a free market.

A distinction must be drawn between two different systems
of control of manufacture which developed during the war.
On the one hand there was the costings system as described in
this book and applied by the Army Contracts Department to the
textile, leather, and other industries and by the Ministry of Food
to the oils and fats industry ; and on the other hand there was
the system applied by the Ministry of Food to the flour-mills.
The former depended on the power to requisition output at
a price based on cost; the latter on the power conferred by the
Defence of the Realm Act to * take possession’ of factories.

Taking possession of land and houses for military purposes
meant that the Government was free to make use of them in any
way it pleased for such time as it thought fit. It was not hable
for rent in the ordinary sense,: but merely paid compensation
for damage done and for loss of business, calculated upon the
return which the property was bringing before the Government
intervened. It did not imply an actual transfer of ownership,
but it conferred unrestricted rights of user on the Government.
This power, which originally applied to land, houses, and factories
and was conferred on the Admiralty and the Army Council, was
later extended to whole industries, in particular to the coal-
mining industry and the flour-millig industry. In these cases,
however, though the Government had the right to use the existing

~ plant in any way it liked and even to install new managers if it so

Aa2

356 COMPARATIVE STUDIES

desired, no great changes actually took place; the announcement
that the flour-mills had passed into the possession of the Govern-
ment was accompanied by general instructions to the owners
to carry on exactly as they had before, and to continue buying
and selling in the normal way, subject only to such directions as
they might receive from time to time. There was never any
detailed interference with the management of individual mills
and very little with their usual commercial operations. The
Government merely controlled the general level of buying prices
and laid down the quality of the flour to be produced and the
price at which it should be sold to bakers. No attempt was made
to fix the price of flour with reference to cost of production and
a fair profit, as under the costings system ; nor was it necessary
to limit profits by calculating conversion costs or margins. For
the principle on which the profits of flour-mills were limited was
based on the pre-war return on the capital invested, not on their
estimated pre-war profit per sack of flour produced. In practice,
owing to the fact that the Government fixed the selling price of
flour below the cost of production in order to give effect to the
policy of subsidizing bread, all the flour-mills of the country were
carried on at a loss. But since they had passed into the possession
of the Government, the owners were entitled to receive fair com-
pensation for the loss sustained through carrying out the instruc-
tions of the Government. The method adopted was similar to
that applied to the railways and the coal-mines ; every firm was
guaranteed its standard pre-war rate of dividend.

This arrangement clearly had many advantages. It greatly
simplified the administrative difficulties of fixing prices, since
there was no need to consider the effect of changes in the price-
level on the profits of manufacturers. It obviated the necessity
for examining cost accounts, invoices, and other private documents
in order to find out what might be taken as a fair margin or con-
version cost. All that was necessary was to fix once and for all
each firm’s standard dividend based on pre-war profit-and-loss
accounts and balance-sheets. Under the costings system, on the
other hand, changes in the price of raw material necessitated
changes all along the line in the prices of intermediate and finished
products ; a rise in the price of raw material gave the holder of

CONTROL OF MANUFACTURE 357

stocks an unearned increment, and a fall led to claims for com-
pensation. Both these difficulties could, indeed, be surmounted,
as for instance in the oils and fats industry, where manufacturers
were required to pay the difference between the old and the new
value of their stocks when the maximum prices of raw material
were advanced. But it was more convenient to be able to alter
buying prices and selling prices at any time without reference to
the value of the stocks held as the private property of manu-
facturers.

There is one serious objection, however, to this system of
control which explains why it was not more generally adopted.
It leaves no financial inducement to the manufacturer to be
economical and efficient. He can be as wasteful and inefficient
as he likes, postpone improvements, pay extravagantly high
salaries, and let the interior organization and management of
the factory deteriorate, and he will still be entitled to draw his
guaranteed rate of dividend. Or again, he can speed up production
and improve the quality and efficiency of his manufacturing
processes without deriving any financial benefit from the economies
and improvements he has effected. In either case the loss or the
gain will be for the account of the Government, but it will be
scarcely noticed in the vast scale of the national accounts. In
a well-organized industry like flour-milling, this psychological
reaction may have been off-set by other considerations such as
pride in the firm’s good name, the desire to build up goodwill
for the period after the war, and the professional and public-
spirited habit of mind which regards efficiency and economy as
ends worth aiming at for themselves without the added stimulus
of profit. But the manner in which this experiment worked falls
outside the scope of the present inquiry. The purpose of the
comparison is merely to draw attention to the principle involved,
and to the contrast which marks it off from the costings system.
The problem of stimulating efficiency and economy under control
will here be examined only in the light of the experience gained
under the costings system.

This problem, it should be noted, arises equally in the adminis-
tration of trusts and amalgamations, and indeed of all large-scale
organizations. Every large-scale organizer is familiar with the

308 COMPARATIVE STUDIES

cramping and deadening effects of organization. Individual
enterprise and initiative are conditions of efficiency and progress,
but it is just these that are stifled by a machine-made organization
which substitutes rules for individual judgement and red tape
for common sense. The solution of the problem sounds a paradox
but it is in reality a commonplace. The success of a trust or large
organization depends on the extent to which it encourages com-
petition and individual enterprise.

A good illustration of this is afforded by the methods adopted
by the London milk combine. When a small retailer is bought
out, it may be because he is inefficient and unenterprising ; or
it may be because, though he is naturally keen and energetic, he
has become hopeless and slack for lack of sufficient scope and
resources. On being taken over, he will usually be appointed
manager of the local milk depot into which his shop is trans-
formed. He is then encouraged to organize the business under
his charge on up-to-date lines, and probably for the first time is
brought into direct and continuous competition with his fellows.
By a system of careful records and cost accounts his methods and
his achievements will be compared at regular intervals with those
of his rivals managing similar depots elsewhere ; and the stimulus
supplied by the spirit of emulation in this contest may prove a
stronger inducement to enterprise, economy, and efficiency than the
hopeless struggle to avoid bankruptcy and make both ends meet,
which had previously been his lot. This is an extreme case, but it
illustrates the fact that the competitive spirit does not necessarily
flourish most in what is called the competitive system. Men do
not always work best on their own; the closer the association the
stronger grows the spirit of emulation. This, combined with
a large measure of administrative decentralization and the en-
couragement of individual responsibility, is the manner in which
successful trusts endeavour to eradicate the evils of red tape and
mechanical uniformity.

Under control there was little danger of organization being
carried to such an extent as to affect the freedom and individual
judgement of the factory manager. Just as you cannot have
a policeman for every cow, so you cannot have an inspector for
every factory. There was thus plenty of scope for economy and

CONTROL OF MANUFACTURE 309

efficiency in factory management ; the question was to provide
a sufficient inducement. The inducement that was found was of
two kinds.

In the first place the costings system was so devised that it
still paid the manufacturer to strive for economy and efficiency.
In the oils and fats industry the practice was to fix the selling
prices and margins once every three months ; in the woollen and
worsted industries prices would be fixed every few months when
large contracts were being given out. The manutacturer therefore
knew the price he was going to receive for some time ahead. He
had no anxiety about buying the raw material, since he was
guaranteed a sufficient supply at a fixed price by the controlling
department. He was therefore free to concentrate his attention
on bringing down his costs below the level which had been taken
as the datum line in calculating the fixed price. Any saving he
could make in this direction was a clear addition to his profit. But
at the end of the three months or when fresh orders were being
placed, his costs might be re-examined, and if it was then found
that he was producing more cheaply than had formerly appeared
possible, the margin and the fixed price might be reduced for the
subsequent period. One source of economy, for example, which
sometimes led to a review of estimated costs in the textile indus-
tries was the saving in overhead charges produced by very large
Government orders for the same quality of yarn or cloth, which
meant that output went on steadily without the interruptions
and constant readjustments of machinery which were necessary
to deal with small private orders. But for the fact that wages,
fuel, and miscellaneous materials were constantly rising, the
operation of the costings system might have resulted in a gradual
reduction of cost owing to a progressive improvement in technical
efficiency. Again, since margins had to be calculated so as to
cover at least the average if not the highest cost, any firm which
increased its efficiency could rely on reaping the full benefit of its
superiority over its rivals. The costings system therefore left
a considerable financial inducement to economy.

It is, indeed, arguable that this method of restricting profits
was more favourable to efficiency than unrestricted profiteering
would have been. It is a familiar observation that a farmer who

360 COMPARATIVE STUDIES

is inclined to take things easy when he is prosperous, works
harder when the landowner raises his rent. The same economic
law applies to a certain class of manufacturer. Before the
war many old family firms which had for years been yielding
handsome dividends to the proprietors were being conducted on
old-fashioned and inefficient lines. The wealthy descendants of the
original entrepreneur found it too easy to make profits to bother
about reducing costs. On the other hand new and over-capitalized
joint-stock companies had to be keyed up to a higher pitch of
efficiency, in order to earn dividends on their watered stock.

In contrast. to the costings system there are other ways of
restricting profits which give no inducement to economy and
rather encourage extravagance. One is what is known as the time-
and-line system, sometimes referred to as the cost-and-profit
system. Under this the Government pays the actual cost, what-
ever it may prove to be on completion of the job, and an agreed
profit expressed either as a fixed amount or as a percentage on
cost, in which case the greater the cost the greater is the profit.
This system is generally confined to intricate constructional work,
where it is quite impossible to estimate the cost beforehand.
Another uneconomical method of restricting profits is Excess
Profits taxation. After the standard profit has been earned, any
extravagance or inefficiency in the manufacturing processes
merely diminishes the amount taken by the Government in taxa-
tion without affecting the manufacturer.

The second kind of inducement which operated under control
has been described in the chapters on Oils and Fats Control. It
consisted in the encouragement of competition in quality. The
system was simple. Makers of the same class of commodity
submitted samples of their products at regular intervals to an
impartial and expert analyst, who awarded marks to all the
sainples submitted in order of excellence. Impartiality was easily
arranged, since the samples could be submitted to the analyst
bearing merely a number instead of the maker’s name. A
periodical list of the marks earned by each firm was then circu-
lated throughout the industry. The psychological effect of this
organized competition was remarkable. During control the best
maker merely won prestige and honour. But if a similar system

CONTROL OF MANUFACTURE 361

could be introduced in normal times and the reports of the
Government analyst or other impartial expert could be published
in the Press, high marks would be a valuable free advertisement ;
they would increase the demand for the firm’s products and thus
prove a financial asset as well as a source of pride. To some extent
the principle is embodied in the scheme mentioned in the last
chapter, whereby the finest milk can now be certified by a Govern-
ment inspector and sold as ‘ Certified’ milk.

Before leaving the subject of efficiency in large-scale organiza-
tions one other instance of organized competition may be noted.
In the National Factories established by the Ministry of Munitions
instructions were given for careful cost accounts to be kept
according to a prescribed plan. By this means it was possible
to ascertain with great exactness the cost of producing, say,
trinitrotoluene, and to compare costs in the different factories
item by item. Periodically all the works managers would be
invited to London and would be shown statistics and diagrams
ulustrating the variations of cost. The cheapest possible cost
would probably be a composite table consisting of items drawn
from several factories ; no factory was likely to be top in all the
items at the same time. Discussions, questions, and explanations
would then follow. The inefficient would feel humiliated or at
least uncomfortable, and all would return with new ideas of
efficiency and economy and a determination to make a better
showing, if possible, next time.

It is questionable whether the competitive system provides
scope for such direct and fruitful competition as this pitting of
experts one against another in their own field. Costs and processes
are kept too secret, and no direct comparison is possible between
the costs and efficiency of rival firms. The test of the balance-
sheet and the profit-and-loss account is not conclusive; a loss
may be due to bad debts or to bad luck, as well as to inefficient
management ; and big profits may be due to good judgement or
successful advertisement quite as much as to economy in pro-
duction and a high standard of technical efficiency. Organized
competition pits like with like, and measures their comparative
efficiency with precision ; the free play of the competitive system
confers its rewards and punishments indiscriminately. A lucky

362 COMPARATIVE STUDIES

gamble is prized as much as superlative merit; and business
instinct may cover a multitude of technical deficiencies.

Organized competition and the encouragement of initiative
and enterprise are essential to the success of large-scale organiza-
tion. This truth has been recognized by successful trusts, and
it was to some extent recognized, as the experiments related
in this book show, during the rough-and-ready national organiza-
tion of industry during the war. Emphasis has been laid upon
it because, though it was not a prominent characteristic of control
in general, it was probably the most valuable feature in those
controls where an attempt was made to introduce it.

CHAPTER XXVIII
TRADERS AS GOVERNMENT AGENTS

Functions of merchants and middlemen — Different relationships between
Government and traders — Individual agency agreements — Collective agree-
ments — Controlled monopolies — Semi-official trade organizations — Direct
distribution by Government — Employment of all or selection — Customary
trade channels maintained or abolished — Trade practices modified — Remunera-
tion by flat-rate, sliding scale, percentage, fixed maximum, lump sum — Financing
by traders or by Government — Guarantees any loss — Control simplified
by delegation of responsibility —Summary and classification of agency
arrangements.

Wirx import centralized in the hands of the Government,
agricultural produce requisitioned at fixed prices, and manu-
facturers’ output requisitioned at prices based on conversion
costs, the ordinary business of buying and selling in free markets
came to an end. Wholesale traders, brokers, factors, salesmen,
commission agents, and middlemen found their usual occupations
threatened with extinction. But at the same time the Govern-
ment, having undertaken the stupendous task of regulating the
flow of commodities at fixed prices, needed machinery for doing it.
Merchants and middlemen, therefore, were almost as essential
as before, but they now acted not as independent principals
buying what and where they liked, but as Government agents
forming links in a single chain of organized distribution.

Before considering the methods and principles by which
organized distribution took place, it will be useful to summarize
and compare the different relationships established between
traders and the Government in different trades. It has been
pointed out in Chapter XXIV that the methods adopted for
organizing import on Government account represented a number
of compromises between official routine and business methods.
The same is true of the regulation of supply and distribution at
home. The exact division of work between the controlling Depart-

. ment and the agent firms followed no uniform plan. ‘The tendency,

as we have seen, was for more responsibility to be devolved on
the traders themselves, as control was gradually extended and

364 COMPARATIVE STUDIES

as the idea of co-operation between private trade and the Govern-
ment began to replace the necessity of compulsion. The contrast,
however, is seen at an early stage. British wool was purchased
by the Government, while British hides were controlled by the
United Tanners Federation. In each case prices were fixed and
the usual buyers continued to function. But in the first case
centralization was effected by State organization, in the second by
a trade association under Government supervision. Where no
trade organization existed capable of regulating prices and distri-
bution, the Government might either make individual agency
agreements or negotiate a collective agency agreement with a trade
organization created for the purpose. Examples of the former
are found in British wool purchase, and in the distribution of
butter, sugar, tea, bacon, and other foodstuffs. Collective agency
agreements were made with the London Wool Brokers Committee,
with Wholesale Meat Supply Associations, and with the United
Kingdom Oilseed Brokers Association. Where there existed
a virtual monopoly, as in tobacco, petrol, and the London milk
trade, no new machinery was necessary. The monopoly continued
to function, subject to control on matters of principle and general
policy. In other cases the trade organization set up would function
as a semi-autonomous public institution like the Butter and
Cheese Imports Committee, or the Smithfield Control Board. In
contrast to these are the cases where the detailed work of distri-
bution was undertaken by the controlling Department itself,
Examples are to be found in flax, wool, jute, and margarine.

One of the chief contrasts between different schemes was the
extent to which the controlling departments found it necessary
or desirable to employ all the existing firms in a trade. At the
War Office the rule against employing middlemen was applied
with a severity which caused undoubted hardship. At the
Ministry of Food the general rule was rather to employ every one
in the trade, so far as was compatible with efficient organization.
Thus at the War Office jute for military purposes, the whole of
the Russian flax supplies, and a large proportion of Colonial wool
were sold to manufacturers direct without intermediaries. Manila
hemp and Indian kips, however, were distributed through the
usual merchants, who earned a small commission. In the purchase

TRADERS AS GOVERNMENT AGENTS 365

of British wool most firms were employed as agents, but very
small firms had to be affiliated as sub-agents to larger firms.
Under the meat scheme live-stock dealers were not permitted to
deal in cattle for slaughter, but practically every other class of
trader—auctioneer, salesman, carcass butcher, and wholesaler—
was employed as Government agents, except at Smithfield, where
a Control Board was set up and took over the stalls of private
firms. Among oilseed brokers some firms were able to take it
easy, or even go out of business altogether, without losing their
share of the pooled commission received and administered by
their Association.

A point closely linked with the foregoing is the extent to which
customary trade channels and existing practices with regard to
weights, measures, discounts, and commissions were maintained
or modified. At the War Office, in hemp and hides, manufacturers
were permitted to choose their own source of supply, but in wool
and flax, trade connexions were broken. In British wool, however,
it was arranged that the wool-buying agents should not know the
manufacturer to whom their supplies were allotted, thus pre-
venting new trade connexions being formed. At the Ministry of
Food the meat trade was completely transformed by the exigencies
of rationing, and trade connexions had to be ruthlessly broken.
In butter, cheese, and other foodstuffs they were retained so far
as possible, until rationing rendered them impossible.

For the most part, trade customs were retained, but customary
commissions were sometimes modified, such as those received by
leather factors and Smithfield salesmen, and greater uniformity
was established in the weights and measures of agricultural
products, such as wool and milk, in the cuts of meat, and in the
quality and constituent elements of margarine and edible fats.
Customary * marks’ were generally retained, as in flax and jute,
but they were superseded by an official grading system in Colonial
wool. The ‘dead weight’ system was encouraged in the meat
trade, and scientific grading was introduced in the milk trade.

As a rule remuneration was fixed at a flat rate commission or
margin per unit handled, calculated to cover the ascertained
expenses incurred and a normal pre-war rate of profit. A
sliding scale would sometimes be arranged, as in the case of

366 COMPARATIVE STUDIES

British wool merchants, allowing for variations in quantities and
qualities handled. The decreased turnover of many traders under
control was recognized as a ground for allowing a rather higher
rate of profit than in normal times. In other cases where a few
brokers or agents handled a larger volume of transactions on
Government account than they would in normal times, the
customary rate of commission would be reduced. In the case of
collective agreements such as those made with live-stock auction-
eers, oilseed brokers, and wholesale meat traders, the commission
would be paid to the Association, and the distribution to individual
members would be left to its responsibility. This system enabled
the Government to escape the difficulty of fixing individual quotas
and making allowances for increase or loss of business. The
auctioneers made special allowances to members hard hit by
control, and the oilseed brokers divided up their remuneration
on the basis of pre-war turnover without any reference to the
volume of work done during control.

In the expenses of.distribution covered by the fixed commission
there was often included the cost of financing stocks handled on
Government account. The merchant, that is to say, paid the
Government, and was himself responsible for obtaining payment
from the manufacturer to whom he was authorized to sell. Some-
times this would mean giving the customary trade credit of four-
teen days or more. This was the practice in oilseeds, hemp, butter,
and cheese. In British wool, the Government itself paid the
farmer and received payment direct from the manufacturer.
Live-stock auctioneers and wholesale meat traders, on the other
hand, financed transactions on Government account as part of
their duties as agents, and accounted to the Ministry of Food for
the balance. Their accounts had to be kept in a form prescribed
by the Ministry of Food, and were subject to inspection and audit.

It is evident that an agency agreement of this kind differs
httle from that of a wholesale or retail firm trading on its own
account under Government supervision, with buying and selling
prices fixed so as to leave a definite margin to cover expenses and
profit. The chief difference was that a live-stock auctioneer or
a wholesale meat trader, if for any reason beyond his control,
such as bad grading, he incurred a loss, could recover the amount

TRADERS AS GOVERNMENT AGENTS 367

from the Government. Recognized agents were guaranteed a
fixed margin ; traders operating under control but not as agents
were limited to a fixed margin but were not guaranteed it. This
explains why retail butchers had to bear the loss of bad grading,
while wholesale meat traders passed it on to the Government.

It would be interesting to compare the different systems adopted
from more general points of view, and to consider how far each
was the most economical, or the most convenient, or the least
unpopular having regard to the circumstances in each trade. But
here the criteria are lacking. Personal and psychological factors
enter in, which would necessitate carefully drawn questionnaires
throughout the whole of a trade to elucidate. Broadly speaking,
it is a safe generalization that things went most smoothly when
the trade ran itself, and when control was exercised by an expert
in the trade, who was known and respected ; and least smoothly
when ruthless economy was aimed at, to the neglect of usual trade
channels and established expectations of a reasonable livelihood.

The main points of resemblance and difference having been
sketched, the various schemes may be roughly classified as under.

1. Individual Agency Agreements.

i. British wool. All large wool merchants were employed as
Government agents at a flat rate of commission per lb. with
a sliding scale of allowances and deductions for exceptional
quantities and qualities handled. Purchases were financed by
the Government, except in the case of small lots in England and
Wales, and local purchases in the interior of Ireland. Small
firms were affiliated to larger firms as their agents. Sales were
made direct by the War Office to manufacturers without reference
to established trade connexions. Farmers were allowed con-
siderable freedom of choice in selecting the agent who would buy
the wool. This system worked smoothly and economically, and
after the first year there were few complaints (Chapter XI).

ii. Manila hemp. Importers were employed as agents and
financed by the Government, and all established wholesale
distributors were allowed a commission (fixed at a flat rate per
ton) for selling to manufacturers. Manufacturers were free to
select. their distributing agent. Trade channels were maintained

368 COMPARATIVE STUDIES

practically unaltered, subject to the exigencies of rationing in
order of priority. The scheme was simple and generally acceptable
(Chapter VII).

ii. Russian flax. The four largest firms with branches in
Russia were appointed buying agents at fixed margins and
financed by the Government. Distribution and sale were con-
ducted by the War Department Flax Office without the employ-
ment of merchants and middlemen. Considering the special
difficulties, the system worked well. It was accepted with relief
by most manufacturers, but was unpopular with the traders who
lost their business (Chapter VI).

iv. Butter and provisions. Until the introduction of rationing
rendered modifications necessary, the usual practice was to employ
all wholesalers as agents at a fixed commission and to allocate
supplies to them in proportion to their turnover in previous years,
thus preserving existing trade channels and connexions.

2. Collective Agency Agreements.

i. London Wool Brokers Committee. Owing to direct
Government purchase, Colonial importers lost their wool business
and many of the smaller merchants and middlemen, who were not
also topmakers, were eliminated. The Government sold direct
to manufacturers without intermediaries ; but also employed the
London Wool Brokers, who pooled their business and formed a
single agency called the London Wool Brokers Committee. The
customary commission was paid with sliding-scale reductions
based on quantity handled.

i. Wholesale Meat Supply Associations. All the wholesale
meat traders of the country were required to join their local
Association as a condition of acting as Government agents.
These Associations appointed councils and executive committees,
which supervised the operations of individual members and kept
accounts on behalf of the Government. Commission was fixed
at a normal percentage on turnover. In London the normal
percentage of 23 per cent. was insufficient to cover expenses
in view of the reduced turnover, and other arrangements had
to be made, which led to the establishment of the Smithfield
Control Board. The Wholesale Meat Supply Associations

TRADERS AS GOVERNMENT AGENTS 369

proved efficient and acceptable to the trade. The chief criticism
came from retail butchers, who were not constituted Government
agents nor guaranteed against loss.

i. United Kingdom Oilseed Brokers Association. This body
acted as sole Government agents for the distribution of oilseeds,
oils, and fats, and all firms in the trade were required to join it
as a condition of doing business. Commission at the rate of 1 per
cent. was credited to the Association. Members were free to
compete for business, and manufacturers could employ whom they
chose; but remuneration was divided up by the Association on the
basis of pre-war turnover, not current business. Members used
their own capital to finance purchases and sales on behalf of the
Government. This system worked smoothly and was generally
acceptable, though it was probably not the most economical system
possible ; but a more rigid organization in the interests of economy
would have meant less individual freedom of choice and more
controversy.

3. Controlled Monopolies.

Examples of this are to be found in the case of tobacco and
petrol, and, so far as London is concerned, in the control of milk
distribution. In these cases the ordinary machinery of distribution
was made use of, viz. the agents, branches, and depots of the
existing organization, under the general supervision and direction
of the Government.

4, Semi-Official Trade Organizations.

i. The Butter and Cheese Imports Committee was virtually
a sub-department of the Ministry of Food, though it consisted of
traders. Its expenses were met by a fixed percentage on turnover.
All the regular importers had their share in the business of handling
and distributing the butter on arrival. Purchases were financed
sometimes by the Government, sometimes by the Committee
‘through banks.

ii. The Smithfield Control Board was financed by the Govern-
ment, but consisted of meat traders and was run as a separate
business concern. The members of the Board received a salary,

but were entitled to benefit by economies in administration.
1569.53 Bb

370 COMPARATIVE STUDIES

Firms whose services were not needed received interest on their
capital and in return gave up their premises, their staff, and their
equipment for the use of the Board.

5. Official Distributing machinery.

Examples of both buying and selling by the controlling depart-
ment without the employment of any outside agents are rare ;
the best example is to be found in jute, where the Government only
bought and sold the raw material required for Army goods.
Colonial wool, apart from the London Wool Brokers Committee,
which only handled a part, was sold and delivered by the
Government to manufacturers ; and the Government had its own
distributing warehouse in Bradford. Russian flax was sold direct
by the War Office Flax Office.

The Margarine Clearing-house is the best illustration of a purely
official distributing organization. Though there were manufac-
turers on the Board, the office and staff belonged to the Ministry
of Food. This system worked satisfactorily, its successful estab-
lishment being due to the absence of any regular and well-defined
channels of wholesale distribution before the war.

To this brief classification of the five main kinds of distributing
machinery may be added a general conclusion, which reinforces
what has been said in preceding chapters. The achievement of
an ordered plan depends on central organization; but the
centralization need not necessarily be in the hands of the Govern-
ment. The more any trade was organized, the less Government
intervention was needed; and the more individualistic the
methods and traditions of any trade, the more bureaucratic and
highly centralized became the emergency organization. Since few
trades were organized into trusts or combinations before the war,
a large dose of officialism was necessary to weld the distributing
machinery into a workable unity; but towards the end of the
war, especially at the Ministry of Food, this stage had been passed
and new forms of self-governing associations of traders with special
constitutions and delegated powers took the place of the autocratic
régime by which control was at first inaugurated. The dis-
tributing trades functioned like established professions, run on
behalf of the nation under prescribed rules and for recognized fees ;

TRADERS AS GOVERNMENT AGENTS 371

and this development of control probably did less violence to the
instincts and traditional outlook of the trading class than is com-
monly supposed. The established merchant resents the intrusion
of the upstart rival and the irresponsible speculator ; he tolerates
and maintains friendly relations with other well-established firms ;
and he takes a pride in earning a reputation for solidity, sobriety,
and courtesy, which are the fruits of the best kind of profession-
alism rather than of a predominantly competitive and acquisitive
outlook. As a class, wholesale distributors are already to some
extent professional in their outlook, and they are gradually
tending, like accountants, auctioneers, and brokers, to become
more professional in their organization. The self-governing
associations established in the meat trade and the oils and fats
trade may prove to be anticipations of a form of organization
which will one day become the rule rather than the exception
in the commercial world.

Bb2

CHAPTER XXIX
ORGANIZED DISTRIBUTION

Adjustment of supply and demand at fixed prices — Rationing and organized
distribution — Contrast with free market — Cotton and grain markets —
Futures, crop statistics, standardization, speculation — Other produce markets
—No futures, imperfect standardization — Unorganized markets — Influence
of rumours and commercial instinct — A story of cement — Monopoly distribu-
tion — Centralized planning and adjustment — Changes of price less frequent —
Uniform prices in different places — Standardization of quantities and qualities
— The importance of reserves.

The clearing-house system under control — Jute, flax, hemp, wool, meat,
vegetable oils, and margarine — The zoning system — Economy of transport —
Financial pooling — Free carriage — Averaging costs — Selling price deter-
mined by average rather than marginal cost — Pooling costs of related products
— Soap, paint, and margarine.

Post-war developments — Gold, petroleum, rubber, and grain — Possibilities
and limitations of organized distribution.

One of the threads running through the foregoing chapters
has been the emphasis laid on the attempts made consciously or
unconsciously to ‘ suspend the laws of supply and demand’. So
far as this aim can be said to have been accomplished, it was
effected by the deliberate adjustment of supply and demand by
organized distribution. It was the application to a whole nation,
even of whole groups of nations, of the political economy of Robinson
Crusoe on his island, of the principle of ‘cutting one’s coat accord-
ing to one’s cloth’. Rationing in the familiar sense was only
a small part of this process. Individual rationing was an im-
portant novelty in the economic sphere ; it struck the imagination
of all, and it was an experiment that none would care to repeat ;
but it was not the most characteristic feature of war-time
control—even of food control. It was never applied to boots or
clothing, or to cheese, milk, or bread. And even in meat and fats,
where it was most in evidence, it became less important as the
organization of supply and wholesale distribution improved.
Without these it would have been almost useless. Ration cards
had to be honoured; and the only way to guarantee the con-
sumer his supply was to ensure that the retailer obtained his
right quota. With or without individual rationing, the real

ORGANIZED DISTRIBUTION 313

problem was to organize wholesale distribution from the source
of supply to the shop counter. On what principles this was accom-
plished and how far the methods employed modified the ‘ laws of
supply and demand ’ will be briefly discussed here.

To begin with, it is worth noting that the laws of supply and
demand work in extraordinarily different ways in different parts
of the business world. A free market in the absolute sense no-
where exists. Much of the old abstract reasoning about supply
and demand is so inapplicable to actual business to-day as to
appear irrelevant or utopian to the present age. If the first task
of economics, considered as a science rather than as a branch of
philosophy, is to describe the facts, it must be admitted that the
actual working of the markets of the world has been very imper-
fectly studied or recorded. For the purpose in hand reference
will be made to four main kinds of market, in each of which the
mechanism by which supply and demand are adjusted has a special
character.

The first kind is best illustrated by the cotton market and the
grain market. These approximate most closely in normal times
to the idea of a free market. By means of publicity, official price
quotations, and telegraphic communications they are virtually
world markets, though the actual buying and selling is concen-
trated in a number of different places, such as Chicago, Liverpool,
London, Calcutta, and other centres where merchants congregate.
Supply and demand are automatically adjusted by the extreme
sensitiveness of the price barometer ; continual small fluctuations
produce proportionately large results ; elements of time and space
are averaged out; and the large amount of speculation which
takes place, especially in cotton futures, ensures under normal con-
ditions a fairly steady price and a reasonably satisfactory adjust-
ment of production and consumption. One point to be noted is
that official and semi-official forecasts of harvests and crops, and
statistics of acreage and out-turn, give an important element of
stability to the market ; merchants and speculators are to a large
extent protected from the vague rumours and false reports which
in many other markets exercise such a disconcerting and incal-
culable influence. One condition of the perfect market in an
economic Utopia would be perfect knowledge on the part of

374 COMPARATIVE STUDIES

operators. In practice, fluctuations are least, and the process of
averaging out climatic and seasonal changes proceeds most
smoothly where both the demand and the supply can be estimated
within reasonable degrees of probability. This condition is realized
in cotton and wheat better than in most commodities; and
official crop statistics, where their impartiality can be trusted, as
in India and the United States, are an important contributing
factor in keeping speculation within bounds. In striking contrast
with a world market of this kind is the foreign exchange market
for depreciated currencies, where both supply and demand are
almost incalculable at the present time even by experts. Rumours
and the caprices of ignorant speculators throughout the world
have had more to do with the changing values of the mark than
the numbers of notes printed or the actual payments that have
had to be made abroad by Germans. Another feature of the
cotton market is the standardization of qualities, which enables
the speculator to gamble with bits of paper without ever seeing
or touching a bale of cotton. In most other commodities buying
and selling in the wholesale market is confined to experts, who
have to appraise the quality and relative value of each parcel,
often by actual inspection. This difficulty does not apply to
German mark notes ; apart from forgeries they are homogeneous
enough to be recognizable even by the amateur.

The second category of markets is found in the majority of
raw materials and foodstuffs with which this book is concerned,
e.g. wool, meat, hemp, flax, jute, oilseeds, oils, and fats. The
chief characteristic of these markets is that there is no well-
organized system of dealing in ‘futures’. In the absence of
‘futures’, which act as the best automatic regulator of supply
and demand, the tendency is for price fluctuations to be more
influenced by considerations of time and place. Again, standard-
ization is less advanced. With the exception of Manila hemp,
which is officially graded by the United States Government, these
commodities are either sold under private firms’ marks, like jute,
or by a more or less significant description, such as ‘ fair average
quality °. The principle of caveat emptor necessitates expert
knowledge on the part of dealers. A skilled wool buyer enjoys
a highly developed sense of smell and touch, and a correspond-

ORGANIZED DISTRIBUTION 375

ingly high salary. Tea and wine have to be tasted; meat is
appraised by a well-trained eye. For these reasons and others,
speculation by amateurs is less popular in these markets than in
cotton, marks, and stocks and shares.

The third broad division includes commodities in which there
is no organized market at all. Commodities in the second class
can be bought or sold at any time in London and other big com-
mercial centres. Mincing Lane is the principal market of the
world for jute, hemp, oilseeds, &c. Smithfield and Chicago are
the world’s meat markets, and the London Sale Rooms are the
centre of the world’s wool trade. But in many articles there is no
central market, but merely a number of dealers. These dealers,
scattered over the world, may in a sense be said to constitute
a market. But their mutual relationships are far less intimate
than those of brokers on a Produce Exchange ; and it often takes
time to find a buyer or a seller. Trade connexions and long years
of experience are required before a man can hope to operate
successfully in a market so diffuse and unorganized. Most finished
articles and a number of raw materials are bought and sold
wholesale in a market where buyer and seller negotiate by cor-
respondence or by personal calls. Commission agents, commercial
travellers, advertisements, price lists, and trade circulars take the
place of the chaffering of the horse-fair or the clamour of the
Chicago pit. The chief characteristic of this form of marketing
is that it is much harder for any single firm to know what is going
on and still more to forecast the future. Rumours, guesses, and
the so-called ‘ commercial instinct’ play a predominant part ;
supply and demand adjust themselves less smoothly, and large
variations of price occur in different places and at different times
under the influence of local, temporary, or even personal causes.

An illustration will make these generalizations clearer. In one
of the Crown Colonies a representative of a London tea and rubber
company heard a rumour going round the clubs that there was
likely to be a big demand for cement in the near future, as the
Government was expected to embark on a large programme of
building and constructional work. He therefore advised his head
office to buy cement and ship it out, adding that he was confident
large profits could be made. The head office did not act on his

3716 COMPARATIVE STUDIES

advice. But other firms who heard the rumour were less prudent.
In a few weeks a continuous stream of cement cargoes began to
arrive, till the ports and warehouses became congested. But
when it arrived it was quite unsaleable. The Government found
prices going down, and therefore decided to postpone its building
programme until the cost of production had reached its lowest
level. Meanwhile the limited financial resources of the Colony
were locked up, and its ports and warehouses were congested with
a commodity for which it had no use at all. As a result it could
not afford to import the commodities it did require. Such are the
disastrous results of a rumour in a market which is no market.
Adjustment of supply and demand under such circumstances
approximates to the limit of imperfection as nearly as in the cotton
market it approaches the limit of perfection.

At the opposite end of the series from the cotton market is the
machinery by which supply and demand are adjusted by a large
trust or combination, which has a virtual monopoly of the com-
modity in question. Here again there is a market which is no
market ; but so far from distribution taking place in a haphazard
way under the influence of rumours, personal relationships, and
business instinct, the adjustment of supply and demand and the
regulation of prices and distribution are governed by exact calcu-
lations and elaborate statistics. The flow of supplies and the
total volume of demand are revealed to a single brain. A tem-
porary surplus can be dealt with in alternative ways: by a
deliberate reduction in price in order to stimulate demand; by
a carry-over accompanied by a reduction in the buying price in
order to reduce the supply ; or, if the combine is a producer as
well as distributor, by diminishing the acreage, running short
time, or in other ways checking production. Similarly a tem-
porary excess of demand over supply can be met either by raising
the price, or by drawing on reserve stocks, or even by some
system of rationing without raising the price. At the same time
immediate steps can be taken to stimulate production. In soap,
cotton thread, petroleum products, borax, tobacco, milk, bottles,
bedsteads, wall papers and many other commodities, which are
subject to rings, price agreements, or combinations on a national
or an international scale, supply and demand are or have been

ORGANIZED DISTRIBUTION 377

adjusted to a greater or less degree by centralized planning and
statistical organization. It is this system that supplies the closest
analogy to the mechanism by which supply and demand were
regulated under Government control. The central feature of the
mechanism of State control, which was the regulation of supply
and distribution from a single centre, is also the main feature of
large distributing trusts and kartels.

One important characteristic which distinguishes organized
distribution from free distribution is that changes in price are less
frequent. The higher the degree of centralization and the more
extensive the statistical information available, the steadier be-
comes the level of price. Price changes are felt to be a disturbing
element which should be reduced to the minimum. Every rise or
fall confers an unearned profit or inflicts an undeserved loss on
holders of stock. When rises and falls are due to forces beyond
control, profits and losses are faced with equanimity. But when
every alteration is the deliberate act of a Government Depart-
ment or of a single firm or group of firms, the results, whether
they confer a benefit or inflict a loss, are apt to arouse criticism
and complaint ; for what is one man’s profit is another’s loss and
vice versa. Uniformity of price can be secured by averaging out
seasonal and other variations in cost.

Besides a tendency towards price uniformity in time, cen-
tralized distribution shows a preference for price uniformity in
space. Petrol, tobacco, soap, cotton thread, and proprietary articles
of every kind are in this country sold at fixed prices throughout
a wide area, practically co-extensive with the United Kingdom.
The retailer is allowed a fixed commission or margin, and becomes
virtually a selling agent. Transport and intermediate expenses are
pooled and averaged out, so that the consumer nearest the point of
production pays the same price for his tobacco, soap, and cotton
thread, or under control for his meat and margarine, as the
consumer in the most distant town or village. One strong reason
for this under control was the difficulty of arbitrarily fixing differ-
ential prices according to distance. To be exact, a differential
price schedule would have required an infinite range of differences ;
anything less was bound to be arbitrary and to involve anomalies
at the dividing lines between areas. The same sort of considera-

378 COMPARATIVE STUDIES

tions, combined with the advantage of being able to advertise one
price in place of a number of different prices, no doubt explain
the uniformity of tobacco and petrol prices in every shop which
is reasonably accessible to the sources of supply.

Uniformity is also obtained by standardization of quantities
and qualities, so that the same goods may be sold at the same
price. Uniform prices are naturally only applicable to standard
qualities and standard amounts. For this reason monopoly
articles are commonly sold retail in the maker’s packages, which,
besides constituting a guarantee of quality, also certify that the
weight or amount corresponds with the description. Standardiza-
tion of weights and measures, of the * cuts’ and joints of meat,
of the contents of margarine and sausages, the containers of milk,
the grades of wool, and the chemical constituents of oils—to
mention but a few illustrations—were necessary under control
not merely to protect the consumer from fraud but as an essential
condition of fixing prices at all. In the absence of recognized
grades price-control had to fall back on the device of fixing
a percentage addition which might be added to the prices ruling
at a previous date for similar but unspecified qualities.

Finally, distribution takes place and prices are fixed in
accordance with some policy or programme which takes into
account on the one hand the ascertained and estimated demand,
and on the other hand the ascertained and estimated supply.
Past, present, and future are passed under review, and represented
statistically by curves, charts, and diagrams. With these aids
the central office plans a long period policy, a normal pro-
gramme for current use, and emergency adjustments to meet
abnormal circumstances as they arise from time to time. Such
planning is easier in normal times, when supplies are flowing
smoothly, than in war-time when supplies were precarious and
consumption had to be severely restricted. It is easier, too, in
the case of a commodity which will keep, like tobacco and soap,
than in the case of a perishable commodity or a commodity the
supply of which is inherently irregular, like fresh meat or milk.
Adjustments in non-perishable goods can be met in normal
times by building up and drawing upon reserve stocks. In
perishable goods the adjustment has to take the form of rapid

ORGANIZED DISTRIBUTION 379

diversion, which needs an efficient and decentralized system
of administration; or again, a temporary surplus may be put
into cold store or used for some other purpose. The regulator in
wholesale milk distribution is the milk trust’s own milk products
factories, which take less or more according to the directions of
head-quarters ; in the meat trade under control the reservoir for
keeping the flow steady was the cold store and the frozen meat
reserve. Factories for making dried vegetables, bottled fruits,
and potato flour, served a similar purpose under the German
Food Administration.

The clearing-house system

The system of deliberately adjusting supply and demand by
organized distribution has been referred to as the ‘ clearing-
house system’ of distribution. Just as debits and credits
are said to be ‘cleared’ in the Bankers’ Clearing-house, so
supplies and requirements, surpluses and deficits were ‘ cleared ’
under control. The metaphor suggests the further resemblance
that it is only the balances left over, after the main adjust-
ments have been settled without difficulty, that require special
attention. Even in meat and milk the normal programme worked
smoothly enough; it was the loose ends and the misfits that
caused the trouble. And as the organization was perfected, many
of these could be dealt with locally by regional offices without
reference to head-quarters.

The clearing-house principle was first seen in its simplest
form at Dundee, where a single office arranged the transfer of
yarn at fixed prices from spinners to weavers. A clerk at the end
of a telephone wire took the place of a crowded market and the
excitement of bidding and bargaining. In Russian flax the central
pivot was supplied by the personnel and quiet routine of a City
office installed in an obscure branch of the War Office. Jute and
hemp were allocated to applicants at regular intervals in strict
proportion to the supplies available and the degree of priority to
which each firm was entitled. In wool the procedure was more
complicated owing to the scarcity of supplies and the wide range
of different qualities. The central clearing-house in Whitehall
had to be supplemented by various forms of rationing machinery

380 COMPARATIVE STUDIES

set up by the trade itself, and the allocation of tops and yarn
was from the outset managed by a local office in Bradford. In
meat each local live-stock market was a clearing-house presided
over by the auctioneer, who with the aid of the Farmers Selection
Committee on the side of supply and the Butchers Allocation
Committee on the side of demand regulated as best he could the
flow of supplies from the local farms to the local shops. Surpluses
and deficits had then to be adjusted between neighbouring
districts by the Area Live Stock Commissioner and his Area Meat
Distribution Committees ; and finally, adjustments between Areas
and the balancing of supply and demand over the whole country
and over a long period rested with the central Meat and Live
Stock Board in London, assisted by the National Meat Distribu-
tion Committee. A similar system of centralized planning and
decentralized execution of a general programme is found in the
various branches of oils and fats control. Allocation of raw
material in bulk for different trades and monthly programmes of
deliveries for various purposes were settled at head-quarters.
But the individual transactions and the splitting up of supplies
between different firms were carried out locally by Trade Com-
mittees or Controlled Associations. Finally, the Margarine
Clearing-house illustrates in name as well as in fact the adaptation
of the clearing system to the wholesale distribution of foodstuffs.
A normal programme was drawn up under which certain districts
would be tied to certain manufacturers, and constant adjustments,
especially before the scheme had got into full working order, were
made by telegraphic instructions from the Clearing-house in
London to meet local and temporary shortages and to dispose of
abnormal surpluses. The Margarine Clearing-house, the Board of
which comprised the leading manufacturers, employed few whole-
sale merchants as agents ; it gave delivery orders direct from the
factory to the retailer, often using the Executive Officer of the
Local Food Committee as the sole intermediary.

Pooling of transport
One feature common to these various schemes was the en-
deavour made to limit transport and cross-hauling to the minimum.
Under the free play of economic forces it frequently happens

ORGANIZED DISTRIBUTION 381

that similar goods move in opposite directions. Milk going from
South Wales to London will cross milk going from Gloucester-
shire to South Wales. Margarine made in London will be sold in
Manchester, and equally good margarine made by a different firm
in Manchester will be sold in London. During control the railway
companies were short of fuel, short of labour, and congested with
munitions traffic ; and instead of soliciting fresh traffic, as it pays
them to do in normal times, they were constantly urging the
controlling Departments to reduce their use of the railways to the
minimum absolutely necessary. This led to the general intro-
duction of what was called the ‘ zoning system’ of distribution,
which meant the splitting up of Great Britain into ‘ zones’ and
arranging that each ‘ zone’ should be supplied from the nearest
or most convenient source of supply. It should be remarked that
this system was bound to conflict with ‘the usual channels of
trade’; for the usual channels of trade are a tangled skein in
which the strands are inextricably intertwined. It could only be
introduced when force of circumstances, or the consent of the
majority of traders, rendered a clean cut with the past possible
and desirable. For it meant breaking ‘ trade connexions ’, which
the business man values more than immediate profits. Trades
which were quite ready to submit to limitation of profits put up
strong and often effective resistance to interference with the
ordinary trade channels. The system is seen at work in many of
the schemes referred to, but not in all. The most striking illustra-
tion of the economy of the zoning system and also of the hardship
involved was found in margarine distribution, where to avoid
unnecessary transport and to simplify the work of the Clearing-
house the Maypole shops in the provinces no longer drew their
supplies from the Maypole factory, but from neighbouring firms.

Financial pooling
Linked up with the question of economy in transport were
the arrangements made in meat and wool and some other com-
modities, first, to pool all the costs of carriage by rail and average
out the result in fixing the selling price; and secondly, to obtain
free carriage of the goods on the railways by virtue of their
being Government stores. To regard meat on its way from the

382 COMPARATIVE STUDIES

slaughter-house or country market to the wholesale meat market
in London or Birmingham as in the same category as guns and
ammunition for the Army was a notable extension of the term
‘Government stores’. But so long as the privilege of free car-
riage was confined to goods which could be accounted for and
controlled by the Government and the carriage on which would
in fact be borne by the Government, there was every advantage
to all parties concerned in doing away with the unnecessary
clerical work involved in making out invoices, cheques, and
receipts for every separate consignment. The cost was met by
an annual lump sum debited to the controlling department and
credited to the Railway Executive’s account.

The principle of pooling was applied not merely to inter-
mediate expenses, but to the prime costs of produce obtained
at different prices from different sources. Occasionally, where
uniform producer’s prices were not the rule, as in milk, the
different sources were domestic and internal ; but in the majority
of cases the different price-levels, which had to be averaged out,
were those ruling in foreign sources of supply. Thus frozen meat
was obtained at different prices according to the country of
origin, Australian and New Zealand meat being the cheapest,
North American the dearest, and South American intermediate
between the two. For selling purposes uniform prices had to be
fixed; fresh and frozen meat from all sources were pooled.
North American meat, which represented a comparatively small
fraction of the total supply, was thus sold below cost price, and
Australasian meat was sold at a profit. A profit in one direction
was used to offset a loss in another. Similarly, imported butter
was obtained from a number of different sources, and the cost
price varied widely according to the state of the market in the
producing countries. Danish butter would cost over 400s. a ewt.,
while South American or New Zealand butter could be obtained
for less than 200s. a cwt. Under control the wholesale price could
be fixed at a figure which represented roughly the weighted
average of the buying prices, viz. about 220s. per cwt., which
was equivalent after adding distributing costs to 2s. 6d. a lb.

It should be noted that in the absence of centralized purchase
and distribution the selling price would have approximated rather

ORGANIZED DISTRIBUTION 383

to the cost of the marginal unit of supply, viz. Danish butter,
and huge profits would have been realized by way of differential
rent by the producers in the cheaper sources of supply. Alter-
natively, if the consumption of butter had fallen off to such an
extent that the whole of the supplies available could not be
absorbed at the price necessary to attract Danish butter, prices
would have come down below the level at which Danish butter
would be imported. There would consequently have been a
smaller supply sold at a higher price than under the system of
centralized purchase, when selling prices were determined by the
average cost instead of marginal cost. This conferred a benefit
on wealthy consumers which the economists call consumers’ rent ;
but it also conferred a social benefit on the health of the com-
munity as a whole, by rendering supplies available to many
people who in a free market would have gone without rather
than pay the price necessary to attract sufficient supplies.

An extension of the‘ financial pool’ is found in Oils and
Fats control, where the principle of pooling was applied not
merely to similar products from different sources, such as Argentine
and Indian linseed or Egyptian and North American cotton oil,
but to different products from different sources. For example,
American oleo, which had to be bought at high prices in the
United States in order to economize tonnage, was sold below cost
price, so as to maintain its selling price at a proper parity with
other raw materials used for a similar purpose. The problem here
was, given so many raw materials in such and such quantities
at such and such prime cost, what was the minimum price at which
margarine could be sold, so as to cover the total cost of all the
raw materials involved ? Having determined this, it remained for
the Oils and Fats Controller to adjust the selling prices of all his
raw materials, so as to preserve the proper balance between them
and to leave the manufacturer only the agreed conversion cost ;
and this involved standardizing the proportion of each raw
material which went into the finished product. A still further
step was taken, when by an adjustment of the selling price of
refined oils and residues the retail price of soap began to have
a direct bearing on the retail price of margarine. Soap and
margarine between them had to cover the cost of a wide range of

384 COMPARATIVE STUDIES

raw materials; it followed that through the institution of the
central pool the price of margarine could be kept steady by an
increase in the price of soap. Indirectly also, the high cost of
paint, varnish, and linoleum cheapened margarine; and the low
price at which the Ministry of Munitions requisitioned glycerine,
raised the price of soap. Price policy was thus guided by con-
sideration of the social utility of the product. As the raw materials
increased in price, the higher cost was thrown on to linoleum,
paint, and soap, while the price of the more socially necessary
products, glycerine and margarine, remained unchanged.

The possibilities and limitations of organized distribution at
fixed prices deserve more study than is here possible. In periods
of national emergency, when self-preservation demands it, it has
been shown to be possible ; but in normal times the adjustment
of supply and demand over any length of time without fluctuations
in price presents very great difficulties. Nevertheless, there are
tendencies which point in this direction. Price-changes are
necessary and inevitable, but on all hands there is a demand that
they should be kept within bounds. Producers and consumers
alike demand greater stability, and some mitigation of booms and
slumps and of the profiteermg and unemployment which they
bring in their train.

Stabilization appears to be possible in the case of one com-
modity where changes in value are recognized to have specially
evil results. The Report of the Financial Commission of the
Genoa Conference has endorsed a plan for regulating the value
and distribution of gold which bears a certain resemblance to the
principles of war-time control. By international co-operation
between the central banks it is hoped to reduce, if not altogether
to eliminate, fluctuations in the value of gold; and the chief
feature of the scheme will be an understanding as to the distribu-
tion of reserves and the adoption of a common policy with regard
to their utilization. Such a policy by steadying the general level
of prices might render it easier to stabilize other commodities.

A similar motive is seen at work in the oil industry. The
large combinations which control the production and sale of
petroleum already do much to mitigate price fluctuations, but
the boom of 1920 and the succeeding slump upset the equilibrium

ORGANIZED DISTRIBUTION 385

of supply and demand and threw production into confusion. The
possibility of stabilization was discussed by the President of the
Standard Oil Company in his address to the American Petroleum
Institute in December 1921. He pointed out that the adjustment
of supply and demand by any other means than automatic price-
changes would involve, first, the building of adequate tank storage,
and, secondly, the creation of a world monopoly. The former he
considered within the bounds of commercial possibility, but the
second was immensely more difficult if not impossible. If
voluntary co-operation by the existing large trusts is unlikely to
be realized, inter-Governmental action similar to that suggested
in the rubber industry may eventually prove necessary. It is
significant that durmg the boom when speculation had forced
prices to an extravagant height, the Commercial Motor Users
Association of the United Kingdom and the Petrol Sub-Committee
set up under the Profiteering Act, recommended that Governments
should take action through the League of Nations to regulate the
price of petrol. In oil, as in gold, adjustment of supply and
demand at fixed prices would involve the pooling and centraliza-
tion of reserves and the adoption of a common reserve policy
throughout the world.

Whether stabilization is likely to be achieved in other com-
modities by similar methods is more doubtful, but a gradual
move in that direction is manifest. British and Dutch rubber
producers have demanded inter-Governmental action to control
the price and regulate the production of plantation rubber. Grain
growers in Canada, Australia, and the United States are in-
creasingly favourable to the principle of collective sale, and there
is a movement, extending even to cotton growers, for Government
guaranteed prices and the building of Government warehouses for
the maintenance of reserves. ‘These tendencies represent rather
an instinctive reaction against the worst effects of the present
slump than a conscious effort to transform the whole system of
marketing. It is a long step from isolated schemes of collective
sale, even under Government auspices, to a world monopoly
effective enough to eliminate fluctuations and undertake a com-
prehensive adjustment of supply and demand. And even with
the most complete machinery of stabilization, price-changes would

1569.53 ce

386 COMPARATIVE STUDIES

never be completely ruled out. The object to be aimed at would
be rather to substitute deliberate and infrequent changes for the
constant fluctuations of speculative markets.

At the time of the Armistice, when inter-Allied Executives
were controlling the price and distribution of a score of staple
products, plans of this kind were widely discussed and might have
proved at least administratively possible. But the psychological
conditions were absent. Reconstruction became identified with
freedom from State interference, and international co-operation in
the economic field gave place to a period of instability, speculation,
and fierce competition.

CHAPTER XXX
REACTION AND RECONSTRUCTION

The transition from war to peace — Conflict of opinion on the future of State
control — An overwhelming demand for freedom — Permanent influences. of
war-time control— The study of administration — Decentralization and
initiative — Delegation of responsibility — Distinction between business ad-
ministration and administration of law — Publicity — The importance of
criticism — Advisory Committees — Statistics and quantitative measurement —
Civil servants and business men — The results of co-operation — The qualities
necessary for successful administration — Administration as a profession —
Effect of control on industry — Development of combination — Reaction after
the war— The need for stability — Merchants as agents — Marketing as a
profession — Progress and stagnation — Conclusion.

Dvrine four years of war the intricate mechanism of com-
merce and industry had been gradually taken to pieces, and its
parts had been forcibly adapted to fit the military machine. So
far-reaching an upheaval in the economic foundations of modern
society, deliberately organized by the most powerful governments
in the world, was bound to leave the future course of trade and
prices incalculable and hazardous in the extreme. The vital task
was to re-establish normal conditions of peaceful trade and inter-
course. How was this task approached ? What happened to the
elaborate structure of State control? And what permanent
influences, if any, remain ?

For a time two opposing views struggled for predominance.
Before the end of the war ambitious plans for reconstruction
were drawn up, usually depending on some form of Governmental
or inter-Governmental control. It was hoped that by adjustments
and improvements in the existing organization, by more fore-
thought and concern for the general welfare, and by concentration
on the essential before the unessential, the economic mechanism
could be brought into greater harmony with the democratic and
equalitarian ideals which the war had evoked. State organization
had proved effective for making war ; might it not prove equally
effective in the more beneficial task of peaceful reconstruction ?

OG2

388 . COMPARATIVE STUDIES

The war produced a socialistic ferment. Nationalization of public
utilities and collective control of private enterprise became the
watchwords of the masses. Large-scale organization and scientific
planning for a time captured the imagination of men of affairs.
A minority even of those who advocated an early return to
freedom and competition were afraid of too rapid decontrol, and
urged that Governments should remain responsible for directing
trade and industry until such time as a stable equilibrium had
been reached. It was argued that the economic system, which had
been transformed out of all recognition by the deliberate action
of Governments, could not be expected to readjust itself to the
needs of peace through the unco-ordinated efforts of hundreds of
thousands of separate individuals. Some guiding hand seemed
necessary to replace and reknit the broken threads.

The contrary view prevailed. The immense majority of
bankers, manufacturers, traders and shopkeepers desired above
all things an immediate removal of the restrictions which ham-
pered their free activities and reduced them to cogs in a vast and
cumbrous machine. Reconstruction to them meant freedom and
scope for enterprise. Without complete freedom trade would
stagnate. Prosperity, progress, confidence, hard work, and
economical management depended on the abolition of State
interference and the suppression of semi-official combines and
trade associations.

This view obtained earliest and most emphatic expression in
the United States ; but it soon found an overwhelming response
among business men in Europe. To the business man’s dislike of
prohibitions and restrictions was added political opposition to
socialistic experiments. In the face of this violent reaction
tentative plans for retaining some of the best features of war-time
control and adjusting them to the needs of peace were swept aside.
Decontrol was brought about as the result of an imperious mass
movement among the most influential minds of three continents.
What remained of State interference were measures of a nationalist
and protectionist tendency, and the economic clauses of a Treaty
which threatened to destroy the possibility of stable reconstruction.

It is not the purpose of this chapter to consider what might
have been, or to conjure back to life the ambitious plans of

REACTION AND RECONSTRUCTION 389

reconstruction that preceded the Armistice. But a few sug-
gestions may be offered as to the lessons and results of war-time
control.
Public administration

Perhaps one of the most lasting influences will be the
stimulus given to the study of large-scale administration. By
this is meant, not merely the conduct of public affairs by Govern-
ment Departments and statutory bodies, but the management of
large-scale industry and the operations of combines, trusts, and
co-operative enterprises. Every big concern has much to learn in
the technique of internal organization, in the development of
efficiency, and the encouragement of individual initiative and
responsibility. The more trade and industry become trustified,
the more they tend to develop the vices of inertia and red tape
which are commonly associated with Government Departments.

It is not always recognized by professional organizers that
there is a point where uniformity and consistency become incom-
patible with the freedom and initiative on which success and
efficiency depend. The most valuable features of the competitive
system are the variety and scope which it provides and the oppor-
tunities which it gives, or should give, to countless individuals to
develop their personalities and be their own masters. Large-scale
organization will never be successful or tolerable for any length of
time, until at least as much importance is attached to this human
need as to the observance of rules and mechanical uniformity.

It is physically impossible for one brain to give decisions upon
more than a limited number of questions in a single working day.
While the director of a one-man business can personally control
every operation of his firm, the head of a Government Depart-
ment or of a large public company can only concern himself with
a small fraction. Administration of a large concern must therefore
be automatic; but automatism is of two kinds, mechanical and
organic. A machine works along rigidly predetermined lines ;
an organism functions by subconscious adaptation of its parts.
The ideal of administration corresponds to the automatism of
a violinist or an expert skater. Conscious direction by the central
brain is confined to the essential minimum ; the detailed opera-
tions are carried out by a subconscious adjustment of subordinate

390 COMPARATIVE STUDIES

organs, and the central brain is only called upon to intervene
when a breakdown occurs or a novel and difficult task has to be
tackled. The most important part of administration is the work
of subordinate officers. The more this is active, intelligent,
and unfettered, the more elastic and frictionless becomes the
functioning of the whole.

It is a temptation to the man of broad vision to see resem-
blances rather than differences, to argue a priort and lay down
fixed rules, rather than to risk experiments and judge by results.
An organizer who has confidence in his own judgement is too apt
to distrust his subordinates. This undermines initiative, keenness,
and the feelings of self-respect and personal responsibility on
which efficiency depends.

Decentralization and delegation of responsibility are illustrated
in the organization of Wool Purchase and Meat Control. Inter-
ference by head-quarters was reduced to a minimum. The risk
of mistakes was provided against, not by insisting that every
important decision should be referred to the Head Office for
settlement, but by placing upon the subordinate officers full
responsibility for their actions and leaving it to their discretion
whether to obtain a ruling from head-quarters. Uniformity and
a common policy were secured as much by periodical meetings
between subordinate officers as by central direction. By this
means collective decisions were taken which were more likely to
be intelligent and generally applicable than a decision taken by
a single Director or Minister on his own responsibility.

The war emphasized a distinction between two kinds of public
administration. Elasticity and decentralization are easier to
introduce in business administration than in the administration
of law. In any large office concerned with health or life insurance,
for example, whether it be a Government Department or a public
company, strict adherence to rules and precedents is inevitable.
The methods of the past hang like a millstone about the official’s
neck. What has been done in one case must be done in every case
of a similar kind. But the same rigid consistency is not necessary
in buying and selling; what happened in the past is of little
concern to the present. Though fairness demands similar treat- ”
ment for similar cases at any one time, completely new principles
may be followed at different times without injustice. A break-

REACTION AND RECONSTRUCTION 391

down in the distribution of margarine lost all interest after the
week in which it occurred. It could be remedied by adopting
different methods in subsequent weeks. The problem in controlling
trade and industry was to plan for the future rather than to follow
the past. Business looks forward, law looks backward. Greater
freedom and fewer records are therefore possible in the adminis-
tration of trade and industry than in the administration with
which Government Departments have hitherto been chiefly con-
cerned. State administration of public services need not neces-
sarily be marked by the rigidity characteristic of the law.

Publicity

The attitude of the public, and especially of the Press, is of
crucial importance. Persistent hostility will wreck the best
technical organization; and the strongest support for difficult and
novel experiments is a tolerant and friendly attitude on the part
of the public and the Press. During the war anything declared to
be necessary for the effective prosecution of the war was assured
of a degree of support quite unparalleled in previous administration
of social affairs. The inauguration of National Health Insurance,
and even the administration of unpopular taxes under the Finance
Act of 1910, were conducted in the face of a strong and well-
organized opposition. The far more difficult task of national
rationing and control of trade was backed by public opimion and
demanded by the Press.

Popular support, or at least acquiescence, may be courted by
publicity and propaganda. This of course has its dangers. The
political abuses of Government propaganda are obvious; _ its
worst feature is that it is not avowed. But useful publicity need
not be surreptitiously inspired ; nor, on the other hand, need it
be confined to official communiqués. What is needed is that
journalists should be freely invited to understand and criticize,
and to give their own impressions of the work in their own way.
Public speeches, both by Ministers and experts, explaining the
work of their Department were invaluable during the war, and
might be usefully extended in peace. The publicity which is
obtained by answering Parliamentary questions is apt to be less
useful. The Department is generally on the defensive, and often
gives the impression of wishing to conceal and sometimes to

392 COMPARATIVE STUDIES

mislead. Many questions too are inspired by political motive,

and are designed to embarrass or disparage rather than to obtain

information. At the best such publicity acts as a check on bad

administration rather than as an aid to efficient administration.
Criticism

Disparagement of Parliamentary questions must not be taken
to mean that criticism is superfluous. On the contrary, public
administration is not criticized enough. Good criticism contributes
to efficiency. But the first qualification of the critic is that he
should understand his subject-matter. Musical criticism, dramatic
criticism, and literary criticism are often unfair and prejudiced ;
but it is not usual for men without any knowledge of music, drama,
or literature to come forward as critics. In public affairs there is
no such disqualification. The standard of criticism is low because
administration is not recognized as an art. It is treated as a
branch of party politics.

During the war criticism was all important, because public
affairs were less amenable to treatment by prejudice and generaliza-
tions. Things were bound to go wrong; administration was bound
to be imperfect ; and an attitude of discreet complacency on
the part of bureaucracy was as useless as blind partisanship
on the part of the critics for solving the real and urgent problems
which had to be faced. Criticism was therefore invited. It was
recognized as a vital adjunct to successful administration. Every
controlling department had its Advisory Committees of expert
and usually forceful critics.

The first essential was that the critic should represent a recog-
nized section of opinion. ‘The reason for this was not that a man
who thought like so many others would be likely to be more
intelligent or constructive, but that his criticisms would count
most and his influence would satisfy those he represented. The
next essential was that the critic should be well informed. As no
one could be well informed on war-time administration without
studying it, this meant that he had to devote a large part of his
time to the work. . Advisory Committees were useful in proportion
to the frequency of their meetings.

Though the best art critic is not necessarily a good artist, an
acute critic of administration is often a good administrator.

REACTION AND RECONSTRUCTION 393

During the war the most troublesome members of Advisory Com-
mittees were often given executive posts. Similarly, valuable
advice and criticism were often supplied by experts engaged in
similar administration in other fields.

Statistics

Publicity and criticism involve statistics. Cost of production,
prices, quality, output, wages, hours, and profits—a mass of
information as to these was obtained under control. Without
easily accessible statistics criticism is blind and administration is
without criterion. Business administration is more easily judged
than the administration of justice, since it is capable of quanti-
tative measurement. To refuse such publicity is to invite sus-
picion. Discontent with the present organization of industry
and with much of public administration is fanned by the attempt
to minimize and conceal the failures and mistakes that every
man knows are bound to occur. Statistics are a solvent. Heated
antagonists are more likely to cool down if they have to sit at the
same table examining figures. The preparation of statistics
provides scope for professional and impartial judgement, and
enables the administrator to watch the results of action and draw
lessons from experience.

One of the most valuable features of war administration was
the collection of data which rendered possible a periodical survey
of the whole national effort. A regular census of production and
consumption is an indispensable condition of a scientific treatment
of economic problems. Such statistics are indeed the raw material
of social science; but after the war the need for them was no
longer recognized, and the labour and expense involved were con-
sidered burdensome and unproductive. The processes of trade
and industry were plunged again into obscurity, and the treatment
of economic problems became once more a matter of guess-work
and improvisation.

Civil servants and business men

The close association of business men and civil servants in the
administration of control gave to each an insight into the
characteristics of the other which they had rarely had the oppor-
tunity of obtaining before. The specialization of the modern

394 COMPARATIVE STUDIES

world renders such intimate contact rare. Each profession tends
to develop a traditional groove of its own and that of the Civil
Service is commonly supposed to be specially narrow and stereo-
typed. It would perhaps be an advantage if exchange of personnel
between the Civil Service and large businesses were commoner
than it is.

Throughout the preceding pages the vitally important part
played by business men who lent their services to the Government
has been emphasized. Without them public administration would
have been paralysed. But it would be wrong to suppose that war-
time control was solely or primarily due to business organizers.
In nearly every scheme with which this book is concerned the
initiation and direction rested with permanent officials, who had
had no previous experience of commercial affairs. But the
execution, the technical capacity, and the personal influence,
without which the best-laid schemes would have been unworkable,
were almost without exception the contribution of business men
who had had no previous experience of Government administra-
tion. Where, as in the schemes described in this book, their joint
efforts were harmonious and on the whole successful, each acquired
a high regard for the qualities of the other; and the result of the
association was to modify preconceptions. Intelligence, versa-
tility, and public spirit were not confined either to one class or to
the other. Business men learnt that some civil servants had
courage and initiative, and that they were generally quick at
picking up the essential facts of a new problem. Civil servants
learnt that able business men had experience and gifts which no
amount of training in a Government office could supply.

There is, of course, a solid foundation for the popular dis-
tinction between the two types. The successful business man
has more opportunities for developing independence of judgement
and a forceful personality. The civil servant by the nature of his
profession can rarely be independent or self-assertive. He can
exercise little freedom of choice. His individuality is fettered by
the fact that he is not his own master. The gifts he needs to
develop are tact, subtlety, and industry rather than leadership,
forcefulness, and enterprise. But the war showed that there were
exceptions to this rule. Many business men brought into Govern-
ment Departments developed the best qualities of civil servants

REACTION AND RECONSTRUCTION 395

and even some of their faults ; and some civil servants were found
to possess as much enterprise and dash as the most forceful leader
of industry. The inherent qualities of a man are more fundamental
than his training and experience.

Fruitful co-operation frequently demanded a new outlook.
The civil servant learnt to take risks and assume responsibility,
and the business man learnt to work in harness and to take
a broad view. Neither the ‘typical’ business man, who goes
straight ahead without forethought or deliberation, nor the
‘ typical’ civil servant, who shirks responsibilities and discovers
convincing reasons for doing nothing, were characteristic of war-
time administration. The type which came to predominate
approximated to a new class of professional administrator—a man
with a gift for leadership and team-work, a public-spirited outlook,
and a moral courage and force of will strong enough to face
criticism and conciliate the vested interests in his path.

This professional outlook is becoming commoner in business
owing to the growing size of public companies and the in-
creasingly bureaucratic management of trade and industry.
Large concerns are run by salaried managers and large salaried
staffs. Boards of Directors are responsible for policy rather than
administration, like Ministers in charge of Government Depart-
ments. And the actual proprietors, represented by the handful
who attend a shareholders’ meeting, often exercise less influence on
the administration of their property than the House of Commons
hason publicadministration. Asin the public service, responsibility
falls more and more on trained and qualified administrators.

Experience of the war suggests that the best way to develop
sound administration is to delegate responsibility, trust the
administrator, and judge him by results on his record as a whole.
Administration must be recognized as a profession, like medicine
or the law, in the sense that its integrity and efficiency depend not
so much on outside control as on its own traditions of responsi-
bility and self-respect.

Effects on industry

Of the effect of control on industry it is too early to speak with
confidence. On the one hand it gave a stimulus to improved
methods of organization. It taught many manufacturers the

396 COMPARATIVE STUDIES

advantages of cost accounting. It encouraged co-operation in buy-
ing and selling, the interchange of experience, even the pooling of
trade secrets. Trade associations sprang up and prospered where
hitherto they had been non-existent or unimportant. Mutual
assistance was found in a host of ways to mean mutual profit.
Unification of contracts, standardization of materials and prices,
pooling of orders, and the encouragement of scientific research—
these and other matters of common interest became in different
industries the conscious aim of professional organizers, who
visualized their industry as a corporate unit and even sometimes
as a branch of the public service.

But after the war came a reaction from the idea of association.
The attraction of unparalleled profits during the boom followed by
unprecedented losses during the slump re-awakened the gambling
instinct and broke the threads of common interest. Technical
efficiency and stable progress along scientific lines became of no
account compared with the problem of finding a market and
cutting out a competitor. The tidal waves of the commercial and
financial crisis which swept over industry after the war have
swamped the foundations of the new order which was gradually
rising from the ground. New problems have arisen which over-
shadow all attempts to reorganize industry on a more stable and
scientific basis. So long as the instability of currencies and
exchanges and the incalculable hazards of foreign trade dominate
the industrial situation, self-preservation and self-interest con-
demn all ambitious schemes of reorganization. Until there is
more stability in commerce and finance, industrial progress will be
impossible.

When the statesmen and financiers have solved the problems
of international finance, the tendencies that were observed during
the war may emerge. The supreme need in industry is to find
means of maintaining regular production without undue fluctua-
tions of price. The larger become the units of industry, the more
disastrous become the social consequences of alternating booms
and slumps. The leaders of industry, in their desire to eliminate
waste and to improve the technical efficiency of their plant, will
be led more and more to combine and co-operate for the purpose
of regularizing production and reducing price fluctuations to
a minimum.

REACTION AND RECONSTRUCTION 397

The tendency towards a professional outlook in industry will
thus be increased. With the growth of stabilization and large-
scale organization, the manufacturer will be less preoccupied
with commercial risks, and will tend to become a specialist con-
cerned with the technical processes of manufacture. So long as
he is assured against losses beyond his control, he will not be so
interested in realizing the highest possible profit. The test of his
efficiency will become the extent to which he is able to reduce
costs by improved methods of organization, by scientific attention
to detail, and by new technical devices. Side by side with a cor-
porate spirit covering the whole of an industry, there will be
keener competition between managers of different factories
engaged in similar processes under conditions which make
comparison possible.

Commercial. organization

If the tendencies indicated above develop in industry, the
position of the merchant will become similar to that which it was
during the war. In many industries the manufacturer is in
a position of dependence on the large merchant. Between the
upper and nether grindstone of the merchant and the organized
worker he is not in an enviable position. But by combining among
themselves and establishing a common policy for buying and
selling, manufacturers would escape from their position of de-
pendence, and the merchant would tend to become an agent
rather than a principal. In some industries this position has
already been reached. Where manufacturers are strong enough
to take the risk of the market themselves, the merchant tends to
become a broker or agent operating for a fixed commission.
Similarly in many of the food trades, especially in perishable
commodities, like meat and dairy produce, the merchant obtains
his livelihood not by taking risks but by performing definite
services for a customary rate of profit. In such cases it is usual
to find that the number of merchants or brokers is limited by
some form of collective organization. Wherever there is an
organized produce exchange there are generally limitations upon
the entry of new members; and in many cases it is made almost
impossible for an outsider to enter the business without the consent
of the trade association concerned. Where these conditions exist

398 COMPARATIVE STUDIES

wholesale marketing tends to become an established profession
with rules and customs laid down by professional trade organiza-
tions.

In the ebb and flow of economic progress two conflicting
forces are seen at work, the one centrifugal and the other centri-
petal. In spite of the disintegration which has followed the war
and has caused an instability greater than at any previous period,
the pendulum is swinging back towards integration. Over a wide
field of economic activity competition between unco-ordinated
units is being superseded by a more conscious control of economic
processes. Trade Associations and Trusts, agricultural co-
operation, consumers’ co-operation and State intervention are
gradually supplanting the free play of competition by more or
less deliberate efforts to control prices, production, and distribu-
tion. Technical efficiency, encouragement of research, and better
adjustment of supply and demand may result from greater
stability and cohesion. But the dangers of such crystallization
are obvious. Vested interest and force of habit may stifle initia-
tive and resist experiment and re-adjustment. And the con-
solidation of trades and industries into professional groups may
merely aggravate conflict and disharmony if there is no means of
co-ordinating their activities in a wider unity. Nor do the
territorial sovereignties of to-day supply a rational basis for such
a synthesis. The natural economic groupings are international
rather than national, and unless Governments themselves learn
to co-operate, their interference may be only a fresh source of
mischief.

How are freedom and initiative to be reconciled with large-
scale organization, and how are the large-scale groupings them-
selves to be harmonized in a wider synthesis ? A solution of these
problems lies beyond our ken. The development of a professional
and public-spirited temper in trade and industry, improvements
in the technique of administration, and the application of scientific
method to the problems of industry may prepare the way ;_ but
the fundamental condition is that men should find a common
purpose in peace as vivid and SOND as the motives which
inspired them during the war.

APPENDIX 1

AGREEMENT CONSTITUTING THE COMMISSION
INTERNATIONALE DE RAVITAILLEMENT

18 aott 1914,

LE Gouvernement anglais et le Gouvernement francais sont d’accord
sur le principe d’une entente relative aux achats que les deux pays auront
a faire pour les approvisionnements destinés 4 leurs armées de terre et de
mer, pendant la durée de la présente guerre.

Toutefois, le Gouvernement anglais, malgré son vif désir de donner
au Gouvernement frangais dans cet ordre d’idées une aide aussi compléte
que possible, se déclare dans l’impossibilité, par suite de état du marché
national et de importance de ses propres besoins, de faciliter ’ exportation
des denrées alimentaires de premiére nécessité, telles que blé, farine,
viande, sucre. Il déclare, en outre, que pour les mémes raisons, il serait
inutile de chercher a se procurer des chevaux en Irlande et au Canada.

Sous le bénéfice de cette restriction, il est institué temporairement
a Londres une Commission franco-anglaise qui assurera dans la pratique
Yentente dont il s’agit. Cette entente aurait principalement pour effet
d’empécher que les deux Gouvernements se fissent concurrence pour leurs
achats sur les marchés extérieurs, concurrence qui n’aurait pas manqué de
provoquer la hausse des prix.

Dans ces conditions, les membres de ladite Commission, qui seraient
constamment tenus au courant des besoins et des ordres de leurs admi-
nistrations respectives, échangeraient tous renseignements quwils possé-
deraient, tant sur les opérations faites ou projetées par ces administrations,
que sur les stocks disponibles et les prix payés ou demandés, sur les marchés
visés.

Cette collaboration n’affecterait naturellement pas la liberté que
conserverait chaque gouvernement de faire directement et indépendam-
ment, par les moyens qui lui conviendraient le mieux, les achats qui lui
seraient nécessaires. On peut toutefois prévoir des cas ou les deux
Gouvernements, ayant les mémes besoins, auraient intérét a passer des
marchés communs.

Ladite Commission comprendrait : du cdté francais, des représentants
des Ministéres de la Guerre, de la Marine et des Finances,— du cdté
anglais, des délégués du War Office, de Amirauté et du Board of Trade.

En ce qui concerne les paiements a effectuer par le Gouvernement
francais pour ces achats éventuels, on propose de les régler au moyen d’un
compte qui serait ouvert audit Gouvernement par la Banque d’ Angleterre
dans les conditions qui ont fait l’objet d’une entente particuliére entre
les délégués francais du Ministére des Finances actuellement a Londres,
et les délégués de la Trésorerie anglaise et le Gouverneur de la Banque
d’ Angleterre.

400

APPENDIX 2

ROYAL COMMISSION OF INQUIRY, DATED MARCH 31, 1915,

AS TO COMPENSATION IN RESPECT OF LOSS OR DAMAGE TO

PROPERTY OR BUSINESS IN THE UNITED KINGDOM OCCA-

SIONED BY EXERCISE OF RIGHTS AND DUTIES IN THE
DEFENCE OF THE REALM

George R. I.
George the Fifth, by the Grace of God, of the United Kingdom of Great
Britain and Ireland and of the British Dominions beyond the
Seas, King, Defender of the Faith, to
Our trusty and well-beloved :
Henry Edward Duke, Esquire, one of Our Counsel learned in
the Law ;
Sir James Thomas Woodhouse, Knight, and
Sir Matthew Gemmill Wallace, Knight,
Greeting !

Whereas We have deemed it expedient that a Commission should forth-
with issue to inquire and determine, and to report what sums (in cases not
otherwise provided for) ought in reason and fairness to be paid out of public
funds to applicants, who (not being subjects of an enemy State) are resident
or carrying on business in the United Kingdom, in respect of direct and
substantial loss incurred and damage sustained by them by reason of
interference with their property or business in the United Kingdom through
the exercise by the Crown of its rights and duties in the defence of the
Realm : j

Now know ye that We, reposing great trust and confidence in your
knowledge and ability, have authorized and appointed, and do by these
Presents authorize and appoint you the said Henry Edward Duke (Chair-
man); Sir James Thomas Woodhouse ; and Sir Matthew Gemmill Wallace
to be Our Commissioners for the purpose of the said inquiry.

And for the better effecting the purpose of this Our Commission, We
do by these Presents give and grant unto you full power to call before you
such persons as you shall judge likely to afford you any information upon
the subject of this Our Commission ; and also to call for, have access to,
and examine, all such books, documents, registers, and records as may
afford you the fullest information on the subject, and to inquire of and
concerning the premisses by all other lawful ways and means whatsoever.

And We do by these Presents authorize and empower you to visit and
personally inspect such places as you may deem it expedient so to inspect
for the more effectual carrying out of the purposes aforesaid.

And We do by these Presents will and ordain that this Our Commission

COMPENSATION FOR LOSSES 401

shall continue in full force and virtue and that you, Our said Commis-
sioners, may from time to time proceed in the execution thereof, and
of every matter and thing therein contained, although the same be not
continued from time to time by adjournment.

Provided that, should you deem it expedient, the powers and privileges
hereinbefore conferred on you shall belong to, and may be exercised by,
any one or more of you.

And Our will and pleasure is that you do, from time to time, report to
the Lords Commissioners of Our Treasury, under your hands and seals,
your opinion upon the matters herein submitted for your consideration.

Given at Our Court at Saint James’s, the Thirty-first day of March,
one thousand nine hundred and fifteen, in the fifth year of our
Reign.
By His Majesty’s Command.
R. McKenna.

1569.53 pd

402

APPENDIX 3
FLAX AND FLAX SEED ACCOUNT

TRADING ACCOUNT FOR THE YEAR ENDING Marcu 31, 1917

a Fan Ne th,

Purchases landed and requisitioned 1,723,494 19 0

Commission on purchases, audit fees, and general expenses at
London, Dundee, Belfast, and sect

18,658 9 6
Balance being profit for the year

354,625 11 3

£2,096,7 778 19 9

War AND MARINE Risks ACCOUNT

Sip sad:
Purchases lost by enemy action . : : : : : : 7,000 0 0
Balance carried forward to next account . : ; é ‘ 116,000 0 0

£123,000 0 0

BALANCE SHEET, Marcu 81, 1917

LIABILITIES

£ s. d. £ 8. d.
Cash from Army Funds :

Excess of payments over receipts met tem-
porarily from Vote of Credit as fs Cash
Appropriation Account

2 3,514,473 3 2
Add cash in bank deducted, now shown

per contra . 107,758 12 2
ee | BHO APB 1d
Sundry creditors : , 3 ‘ : 5 : : 59,874 7 1
War Risks Account balance , : : 4 ; : 5 116,000 0 O
Profit as per Trading Account . ; : ; : : 354,625 11 3

£4,152,731 13 8

FLAX AND FLAX SEED ACCOUNT 403

£ Sod: £ Ss. d
Sales, interest on bills, fees for transit facilities
granted on private flax, and i on neeke
yarn and cloth : . 2,105,138 16 1
Deduct—
Provision included in sales for War and Marine
risk : : : - : Sia 123,000 0 0
982 )38el omel
Stock : :
Flax andtow . : : ; : : 107,512 18 8
Flax seed . : : : : : é ile @
114,640 3 8
£2,096,778 19 9
A Sos
Provision included in sales : ; : : i ‘ : 123,000 0 O
£123,000 0 0
ASSETS
Sande
Cash in bank ; (ons: DS Lae)
Sundry debtors, including bills receivable and general average
deposits . : ¢ : : A USO TE 8
Stock : 28 Gh:
Flax and tow , : : 5 . 107,512 18 8
Flax seed =. 4 : . a , : Wiellyar 33) 10
114,640 3 8
Advances from Public Funds against ree in Russia for 1917
shipments . : : A : ; fs ~ oyfitesenn) (h) §)

£4,152,731 13 8
pd2

404 APPENDIX 3

FLAX AND FLAX SEED ACCOUNT (cont.)

TRADING ACCOUNT FOR THE YEAR ENDING Marcu 31, 1918

£ 8. d. SS mes
To Stock at March 31, 1917:
Flax and tow - 3 5 : 107,512 18 8
Flax seed : 7,127 5
114,640 3 8
,», purchases : ag Sheds
Remitted to Russia, 1916-17 3,758,333 6 8
Remitted to Russia, 1917-18 5,151,554 17 8
—__—__—— 8,909,888 4 4
Payment to Ralo_. ‘ Side O10
Estimated lability on 1917-18 shipments f 200,000 0 0
9,118,599 4 4
Dundee purchases . : : : é 401,573 5 11
Dutch flax purchased . : : : 265,082 3 9
Flax seed purchased 2 . 5 ‘ 304,231 5 93
10,089,485 19 3
Less— Bh Uh
Losses to Marine and War Risk :
Flax . : ; : 996,948 0 0
Flax seed ; : 43,062 4 0
——_——— 1,040,010 4 0
9,049,475 15 3
To Freight Account . : : ; és 5 753,133 7 3
»» landing charges, warehouse rent, &e. . : 43,443 13 10
», commission on purchases, audit fees, and general expenses at
London, Dundee, Belfast, and Russia, including estimated
charge for services of War Office branches and other Government
Departments. : : : : 153,424 8 2
>, Interest on advances from Army Funds . : : , : 191,752 18 9
10,305,880 6 11
», trading profit for year . : ‘ : : : : - 936,207 14 2
£11,242,088 1 1
MaRINE AND War Risk Account as aT Marcu 31, 1918
£ Sin ds 58 s. d.
To flax on sunk steamers . : ‘ : 996,948 0 0
», flax seed on sunk steamers . é : 43,062 4 0
: 1,040,010 4 0
,», freight on sunk steamers :
Flax, &c. F 3 , : F , 89,309 0 O
Flax seed . : § : : : 3,449 16 6
——— 92,758 16 6
i £1,132,769 O 6

FLAX AND FLAX SEED ACCOUNT 405

ag 3s Gh. £ a Gh
By flax and tow sold, ee interest on bills 9,090,571 9 7
>, flax seed sales. ; 106,616 2 10
——_—___—_—_— _ 9,197,187 12 5
Less—
Provision included in sales to cover Marine and
War Risks :
Flax 4 ; : ; 3 ' 761,137 0 0

Flax seed : : Y : : 2,891 0 0
— 764,028 0

8,433,159 12 5

o

To stock as at March 31, 1918:

Russian flax and towin United Kingdom . 2,354,119 15 O
Dutch flax in United Kingdom and Holland 272,178 3 9
Flax seed in United Kingdom and Holland 182,630 9 11
——__—_—_——- . 2,808,928 8 8

£11,242,088 1 1

LS. dd. cs
By balance at credit as at March 31, 1917 . : 116,000 0 0
,, General Trading Account, being allowance
of 13s. 1d. per ton on flax shipment sales . 761,137 0 0
And 6 per cent. on cost of flax seed apmen
sales : : 2,891 0 0
a= 764,028 0° 0
By salvage sold : ; . ‘ : é 23,633 10 1
By balance at debit as at March 31, 1918 ; ‘ . ; A 229,107 10 5
£1,132,769 0 6

406 ‘APPENDIX 3

FLAX AND FLAX SEED ACCOUNT (cont.)

BaLANcCE SHEET AS AT Marcu 31, 1918

LIABILITIES
Cash from Army Funds : Seisonds £
Balance at March 31, 1917 as per Cash ata
priation Account to that date - 3,014,473 3 2
Deduct—
Excess of receipts over payments for hie
ending March 31, 1918 : ‘ 2,464,885 1 6

1,049,588 1 8
Amounts in transit between Dundee and London,

as at March 31, 1918 . a j , 45,000 0 0
= —— 1,012,698
Reserve for interest on cash provided from Army Fonds : : 258,959
Estimated charge for services of War Office branches and other
Government Departments . ‘ é 5 g : Z 56,099
Sundry creditors ‘ , ‘ ‘ : ; : F . 1,208,073
Profit and Loss Account : £ 8. d.
Balance at credit as at March 31,1917. 354,625 11 3
Less—
Interest on advances from Army Funds to
that date . : : 67,196 10 0
287,429 1 3

Profit for year to date c 936,207 14 2

an oo

—— 1,223,636 15

£3,759,466 18

TRADING ACCOUNT FOR THE YEAR ENDING MARcH 81, 1919

To stock as at March 31, 1918: aa s&s. d. £ Kp
Russian flax and tow in United Kingdom 2,354,119 15 0
Dutch flax in United Kingdom and Holland 272,178 3 9
Flax seed in United Kingdom and Holland 182,630 9 11
——————— 2,808,928 8
To purchases :
Russian flax . : VOTTES22ueo wet
Estimated liability on 1918-19 shipments 800,000 0 0
2, 777,822 3 7
Flax purchases on spot . ; 246,669 2 5
Dutch flax purchased, including freight : 268,480 18 7
Flax seed purchased, including freight . 530,288 19 0

Egyptian and Australian flax, including freight ibe UM

3,835 058 5 6
Less—

Losses to Marine and War Rieke heveuae
(including freight) : 2,462 5 10

Freight Account

239,574 5

To landing charges and warehouse rent, &e. : 51,509 0
To commission on purchases, audit fees, and general expenses at
London, Dundee, Belfast, and in Russia, including estimated
charge for services of War Office branches and other Government

Departments. F . ; ‘ 54,235 9

To interest on advances from Army Funds. A 2,122 16

6,988,965 19

To profit for year to date . 2 a ; ‘. z 3 « ) 1b236:235 23

3,832,595 19

owen) ow

oo © CO

5
0
8
8

£8,225,201 3 4

FLAX AND FLAX SEED ACCOUNT

f ASSETS
Stock :
Russian flax in United Kingdom :
Dutch flax in United Kingdom and Holland
Flax seed in United Kingdom and Holland

Marine and War Risks Account .
Balance at debit:
Sundry debtors

a8 Cp
2,354,119 15
« 272,1738"3

d.
0
9

182,630 9 11

Cash due by Clydesdale Bank, Ltd., Dundee and London

By Russian flax and tow sold, ere
interest on bills . : F

>, Dutch flax sales .

,, flax seed sales ;

, Australian and Egyptian flax sales

Less—
Provision included in sales to cover marine
and war risks:
Flax
Flax seed

To stock as at March 31, 1919:
Russian flax and tow in United Kingdom
Dutch flax in United Kingdom

3 Sunde
Flax seed in United King-
dom. 56,160 5 O
Flax seed in Ontario,
Canada . : F 23,990 0 O

22 8
4,102,978 18
392,635 0

d.
4
9

730,444 19 11

10,249 4

262,327 0
31,840 0

3,022,108 15
180,800 19

80,150 5

4

Oo ©

2,808,928
229,107

713,321
8,109

£3,759,466

5,236,308

294,167
4,942,141

3,283,060

£8,225,201

407

10

“10 [21 ie 2)

18

408 APPENDIX 3

FLAX AND FLAX SEED ACCOUNT (cont.)

MARINE AND War Risks Account As AT MaRrcH 381, 1919

To balance at debit as at March 31, 1918
», Hgyptian flax lost

5, balance

BALANCE SHEET AS AT Marcu 81, 1919

LIABILITIES

Marine and War Risk Account

Reserve for interest on cash provided from Government Funds
Estimated charge for services of other Government Departments
Sundry creditors

Profit and Loss Account : , ; £ & d.
Balance at credit as at March 31,1918 . 1,223,636 15 5

Profit for year to date . ‘ 1,236,235 3 8

5 SS GE
229,107 10 5
2,462 5 10

231,569 16 3
69.146 15 2

£360,716 11 5

ae Sas
69,146 15 2
261,082 4 9
THBBR) BB
2,085,607 6 8

2,459,871 19 1

£4,953,040 8 1]

FLAX AND FLAX SEED ACCOUNT 409

£ 8. d.

By General Trading Account, being allowance
of 13s. 1d. per ton on flax shipment sales 262,327 0 0

And 6 per cent. on cost of flax seed aati
ment sales : 31,840 0 0
» salvage sold é : } ; : 11,784 0 7
Less—

Salvage expenses . ‘ : : 4 6,236 10 9

» freight received on sunk hemp, private parcels ;

», claim against owners, 8.8. Bors, for flax seed sunk, 8.8. Amuld,
1917-18 season, and loss debited to this account, £53,034 5s.
Meantime estimated at no value . :

ASSETS
Stock : fs.
Russian flax in United Kingdom . A 3,022,108 15 9
Dutch flax . 180,800 19 3
Flax seed in Dnited Kingdom ‘and Canada 80,150 5 0O
Sundry debtors
Cash :
Clydesdale Bank, Ltd., Dundee and London 3,039 14 11
Dutilh & Co., Holland : 1,217 12 3
Canadian Board of Agriculture : : 30,197 5 4
E. R. Wayland & Co... : ; : 30,472 16 8
Cash to Government Funds :
Excess of receipts over payments to March 31,
1919 . 2,066,812 5 9
Amounts in transit between Dundee and Lon-
don as at March 31,1919 . ; 5 17,500 O
2,084,312 5 9
Deduct—
Balance at March 31, 1918, as per Cash Ap-
propriation Account to that date : 1,004,588 1 8
1,079,724 4
Less—
Sone
Cash at bank per above . 3,039 14 11
Cash due by Dutilh & Co,
Holland . 22s
Canadian Board of Agricul-
ture . 30,197 5 4
R. Wayland & Co., flax
seed growing scheme . 30,472 16 8
a 64,927

294,167 0 0

5,547 9 10
LOPS — 7

£300,716 11 5

3,283,060 0 0
590,256 4 10

64,927 9 2

1,014,796 14 11
£4,953,040 8 11

410

APPENDIX 4

RAW JUTE ACCOUNT

TrapInG Account FOR PERIOD TO MarcuH 81, 1917

Bales £ s. do

To jute bought and shipped from Calcutta on Govern-
ment account, including freight to Dundee. . 201,786 903,528 17 2
», jute requisitioned on spot or afloat unsold , > 65,077 109,334 4 1
», commission on purchases and audit fees . : : 19,502 12 5
», profit for the year to date . : : 2 ‘ 33,597 7 2

216,863 £1,065,963 0 10

MARINE AND War Risks Account

To purchases lost by enemy action . “3 : : : : Nil

BALANCE SHEET AS AT Marcu 81, 1917

LiaBILiTiEs

Cash from Army Funds : £ S. d: £ &. d.
Excess of payments over receipts met tem-
porarily from Vote of Credit as ca Cash

Appropriation Account : 481,920 5 6
Deduct—
Advanced by eos Bank, shown pe

rately below P 8,430 9 2
— 473,489 16 4
Clydesdale Bank, Ltd., overdraft on Current Account . ‘ : 8,480 9 2
Sundry creditors : ‘ : ; 48,810 6 8
Marine and War Risks Account—balance , ; : : : 11,000 0 O
Profit as per Trading Account . ; : : : : : 33,597 7 2
£575,327 19 4

RAW JUTE ACCOUNT

By jute shipped from Calcutta and allocated to spinners
and manufacturers in Dundee against Government

orders 3 :
Less—
Premiums charged to cover Marine and War Risks
insurance 3 ies

By jute requisitioned on spot and sold for private trade
By stock as at March 31, 1917: “5 Ebb
Afloat to Dundee . ; ; . 283,089 4 2
Requisitioned jute in warehouse : 3,957 6 5

By premiums included in sales as above

ASSETS

Sundry debtors on open account .
Stocks in warehouse and afloat

Bales

147,058

14,579

54,728
498

216,863

411

678,498 7 7

11,000

667,498
111,418

778,916 10 3

0 0
70.3
2 8
287,046 10 7

£1,065,963 0 10

gh > BGK
11,000 0 0

SES Sethe
288,281 8 9
287,046 10 7

£575,327 19 4

412 APPENDIX 4

RAW JUTE ACCOUNT (cont.)

TrapiInc AccouNT FoR YEAR ENDING Marcu 81, 1918

14

No
oow

10 10

Bales £ 8 d. £
To stock at March 31, 1917:
Afloat to Dundee 5 . P 54,728 283,089 4 2
Requisitioned jute in warehouse . 498 3,957 6 5
287,046 10 7
To jute bought and shipped from Cal-
cutta on Government account
including freight to Dundee . 354,865 1,455,950 8 7
», jute requisitioned on spot or afloat
unsold. : : : . 257,337 2,007,186 18 1
667,428 3,750,183 17 3
Less—
Cargoes lost through enemy action,
8.8. Malakand and Clan Cameron 32,740 160,971 7 9
3,589,212
634,688
To administration expenses, including
charges for service of War Office
branches and other Government
Departments . — — 12,945
>, amount due to Ministry of Shipping — — 15,065
» interest on Army Funds : — — 25,837
», estimated liability on jute sold at
market value, subject to rebate
if ee ase for Government
orders 5 : - 3 — -- 260,380
», net profit for year . . F — — 385,232
634,688 £4,288,672
MARINE AND War Risks ACCOUNT
March 31, 1918: £
To value of cargoes lost through oo ee 8.8. Malakand and
Clan Cameron . : 2 : ‘i 160,971
To salvage claims on S$. S. Stockwell . : : : ; < 650
To balance . é : ' ‘ ; : ‘ 47,136

£208,758

RAW JUTE ACCOUNT 413

Bales s Gh Uh £ 8. a.
By jute sold to spinners and manufac-
turers in Dundee, subject to re-
quisition for Government orders 332,163 2,185,171 0 9

Less—
Premiums charged to cover marine
and war risks insurance . -_ 197,758 O 0
1,987,413 0 9
By requisitioned jute sales : . 252,239 2,036,137 2 11
———__——— 4,023,550 3 8
By stocks as at March 31, 1918:
Afloat and on quay : 28,273 145,951 7 2
Warehoused in United Kingdom - 16,417 70,671 0 0O
Requisitioned jute in warehouse . 5,596 48,500 0 0
a ee 265,122 7 2
634,688 £4,288,672 10 10
March 31, 1917: £ Ss. a.
By balance . . . . : 11,000 0 0
Marchi 31, 1918: by premiums collected for year : ; 2 197,758 0 0

£208,758 0 0

414 . APPENDIX, 4

RAW JUTE ACCOUNT (cont.)

BALANCE SHEET AS AT Marcu 381, 1918

LIABILITIES
Sundry creditors : 6h UE £ s. d.
On Open Account . : ; é ; . 51,398 6 3
Sales Adjustment Account . ‘ ; . 132,456 0 0
——_——— 183,854 6 3
Marine and War Risks Account : F s 47,136 12 3
Reserve for interest on cash provided on Army Funds . 5 32,226 2 0
Estimated charge for service of War Office branches and other
Government Departments . A 5 B e ‘ z 25,065 0 0
Profit and Loss Account : pe GB UE
Sum at credit at March 31,1917 . £ ; 33,597 7 2
Less—
Interest on advances from a Funds to that
date . : d 6,389 0 0
PareyaUes Tf 24
Profit for year to date . ‘ : : . 385,232 5 2
412,440 12 4

£700,722 12 10

RAW JUTE ACCOUNT

ASSETS
Sie sie ds
Due by neg ae Bank, Ltd., London ~. . 23,690 6 1

In hand 5 < (By Yi

Sundry debtors: On Open Account .

Note.—Jute arrived at London at March 31, 1918, ‘to the value
of £33,765 3s. 7d. has been invoiced to buyers, but these
sales are subject to safe arrival at Dundee.

Stocks of Jute warehoused in United Kingdom and afloat

Cash to Army Funds : Sa oad,
Excess of receipts over pens for he ending
March 31,1918 . : . 846,659 5 4
Deduct—

Balance at March 31, 1917, as Oss eDErons HON
Account to that date . - 481,920 5 6

364,738 19 10

Amounts in transit between Dundee and London at

March 31,1918 . 5 H : . : 36,697 0 1
401,435 19 11
Less—

Cash at bank and in hand as above . ‘ ; 23,704 3 8

415

bo
we
~I
SS
m=
w
ow

34,164 5

265,122 7 2

377,731 16 3
£700,722 12 10

416 APPENDIX 4

RAW JUTE ACCOUNT (cont.)

TRADING ACCOUNT FOR THE YEAR ENDING Marcu 31, 1919

To stock as at March 31, 1918:
Afloat and on quay .
Warehoused in United Kingdom
Requisitioned jute in warehouse

To jute bought and shipped from Cal-
cutta on Government Account,
including freight to Dundee, and
purchases for Allied Governments

,, jute requisitioned on spot or afloat
unsold 3 5

Less—

», jute destroyed in transit trans-
ferred to Marine and War Risks
Account, including estimated sum
for loss on 8.8. War Lance, £60,000

To Administration expenses, including
estimated charge for services of
Office branches and other Govern-
ment Departments

,», amount due to Ministry of Shipping

», estimated lability on jute sold at
market value, subject to £10 per
ton rebate if requisitioned for
Government orders :

», Sales Adjustment Account, charge
in respect of adjustment of price
in final settlement of Government
jute A

», net profit for year .

Bales
28,273

16,417
5,596

928,548

7,297
986,131

7,215

978,916

978,916

£ Ss.
146,951 7
70,671 0
48,500 0
265,122 7
5,266,456 4
59,098 16

5,590,677 7

95,472 0

d
2
0

bo

a 8: Us

5,495,205 7 4

12,305 11
47,336 0

ow

651,150 0 0

136,609 14 2
259,952 3 10

£6,602,558 16 7

RAW JUTE ACCOUNT 417

Bales Ge Oh Sn Sees
By jute allocated, subject to requisi-
tion for Government orders and
including sales to Allied Govern-
ments . ; : . 688,319 5,272,874 17 5

Less—
Jute at provisional sale prices to be
returned by spinners in terms of
letter of March 28, 1919, issued by :
Director of Raw Materials F 18,080 178,439 O 11

670,239 5,094,435 16 6

Less—
Premiums charged to cover marine
and war risks insurance . ; — 338,522 7 6

4,755,913 9
By requisitioned jute sales : - 12,893 11S .2 2581S es

o

4,869,139 7 2
By interest on Ministry of Munitions
(Supply) Raw Materials Finance

Current Account ; — — 22,715 0 0
By stock as at March 31, 1919:
Afloat : . 113,249 642,968 8 6
Warehoused in United Kingdom
andonquay . . 182,535 1,067,736 O 11

— 1,710,704 9

Or

978,916 £6,602,558 16 7

1569.53 Ee

418 APPENDIX 4

RAW JUTE ACCOUNT (cont.)
MARINE AND Wark Risks ACCOUNT

March 31, 1919:
To value of jute Sarl
», balance .

BALANCE SHEET AS AT Marcu 381, 1919

LIABILITIES
Sundry creditors : £ s. d
On Open Account . hi : : - 688,979 0 10
Sales Adjustment Account 745,126 4 2

Marine and War Risks Account . ‘ :
Reserve for interest on cash provided < on Army Funds .

Estimated charge for services of War Office branches and other
Government Departments eee 5 :
Profit and Loss Account : s

Sa Qe
Sum at credit at March 31,1918 . ; - 412,440 12 4
Profit for year to date : : - 259,952 3 10

£

318,401

£413,873 0

eo

—

GO

ee

So

hm OL
boo Ol

ee)
)
i
co)
—
Oo

672,392 16

Gy Gh
95,472 0 0
0 0

0

So oc Se

£2,516,811 3

RAW JUTE ACCOUNT 419

March 31, 1918: £ Bh Oh
By halance ‘ : r 3 47,136 12 3
March 31, 1919: by premiums collected for year : : : 338,522 7 6
By salvage sales. F ; ; : 28,214 073

£413,873 0 0

ASSETS
Cas £ &, Ob © $d.
Das by Gees Bank, Ltd., London . - 110,751 4 8
In hand ‘ : : 41 12 3
a 110,792 16 11
Sundry debtors :
On Open Account . : : ; : 3 : : 5 55,093 14 5
Italian Government ; ‘ 275,936 13 4
Stocks of jute warehoused in n United Kingdom and afloat : 710570495
Cash to Army Funds: £ Suds
Balance at debit at March 31, 1918 : - 401,435 19 11
Excess of receipts over payments for shi
ending March 31, 1919 2 : . 65,884 13 0

467,320 12 11
Amounts in transit between Dundee and London

as at March 31,1919 . < 2 i 5 eztssy UB)
475,076 6 0

Less—
Cash at bank andin hand as above . : . 110,792 16 11

364,283 9 1
£2,516,811 3 2

E2e

420

APPENDIX 5
MANILA HEMP ACCOUNT

TrapDiInGc Account, JUNE 1, 1917 To Marcu, 31, 1918

£. 8. de
To purchases, including freight . : A < , < . 2,723,166 19 4
», sundry charges and expenses A ; : 686 13 2
», interest on advances from Army Funds (see contra) 5 2 —
», balance as per Balance Sheet being net profit for the period. 710,993 19 3

£3,434,847 11 9

MARINE AND War Risks ACCOUNT

March 31, 1918: £ 8 de
To cost of cargo lost by enemy action . 2 < : 5 222,906 14 10

£222,906 14 10

BaLANCE SHEET, Marcu 31, 1918

To cash from Army Funds : £ $.. de
» excess of Wipe: over oe met be aienie from Vote of
Credit A : A 428,414 5 7
>» Sundry creditors . 260,748 2 6
», estimated cost of services rendered by other Public Departments 100 0 06
», Trading Account :
Estimated profit as per account annexed . . ; 5 : 710,993 19 3
£1,400,256 7 4
TRADING ACCOUNT FOR THE YEAR ENDING Marcu 81, 1919
Bales £ Soda
To stock, April 1, 1918 : ‘ : , ‘ : 129,205 1,251,788 4 1
» purchases . : 436,834 3,310,439 9 6
»» Sundry charges and expenses ‘including allowance for
services rendered by other Government Departments — 2,177 17 11
», interest on account with Army Funds, estimated . co 32,700 0 0

566,039 £4,597,105 11 6

MANILA HEMP ACCOUNT

By sales after deducting provision for War and Marine risk and

agents’ commission
3, Stock landed and afloat
», interest on account with Army Funds estimated

March 31, 1918:
By provision included in sales :
;, balance carried forward to next account.

By sundry debtors

,, stock in the United Kingdom and afloat

», Marine and War Risk Account é

5, interest on account with Army Funds, estimated

By sales after deducting freight, agents’ commission, and
provision for Marine and War risk

By stock in the United Kingdom and afloat at March 31,
1919 :

By balance as per Balance Sheet, being loss for the year

Bales
408,102
157,937

566,039

421

£ Sate

2,175,901 7
1,251,788 4
7,158 0

£3,434,847 11

o!lomoo

ag Sands
194,430 0 0
28,476 14 10

£222,906 14 10

£ Sy Os

3 112,833 8 5
1,251,788 4 1
28,476 14 10

7,158 0 0

£1,40 400, 256 7 4

8 D Gh
3,337,922 16 2

1,028,438 12 6
230,744 2 10

£4,597,105 11 6

422 APPENDIX 5

MANILA HEMP ACCOUNT (cont.)

MARINE AND War Risks AccOUNT

April 1, 1918: ake, WR
To balance at this date . : A 5 és i ; S 28,476 14 10
March 31, 1919:
To losses by fire and marine risks during the year to date . é 4,857 4 10
To balance at this date . : : 3 : ; 5 - 242,879 O 4

£276,213 0
BALANCE SHEET, Marcu 31, 1919

To cash from Army Funds: 5 8s. a. Leesan
Excess of payments over Receipts met tem-
porarily from Votes of Credit :
Excess of payments over Receipts for the yen

ending March 31, 1918 3 3 428,318 0 0
Deduct—
Balance as per Appropriation Account for the
year ending at thisdate . : : 280,241 19 8
ee 148,076 6 4
To sundry creditors . 187,801 1i 2
>», Marine and War Risk Account, balance as per account annexed 242,879 0 4
», estimated amount due to other Government Departments for
services rendered p , : : 3 A 300 0 0
»» interest on Army Funds, estimated 2 ‘ A . . 25,542 0 O
», Trading Account : £ 8. d.
Balance at March 31, 1918 : : a LAR S4 ae LO
Less—
Loss for the year to date . , é : . 230,744 2 10

483,597 5 0
£1,088,196 2 10

MANILA HEMP ACCOUNT 423

March 31, 1919: eGR Oh
By provision included in selling prices during the year to date . 276,213 0 0
£276,213 0 0

S&S Oh

By sundry debtors. F : : , 59, 757 10 4
By stock in the United Kingdom and afloat : : - 41,028,488 12 6

£1,088,196 2 10

424,

APPENDIX 6
BOOT AND LEATHER COMMITTEES

Central Committee

Terms of Reference.—To advise the Department as to the measures
necessary for the production and conservation of leather for military
purposes with due regard to consideration of exchange, transport, and
labour.

Government Representatives.—Mr. E. F. Wise (Chairman), War
Office ; Mr. E. Penton (Vice-Chairman), War Office; Mr. H. R. Corner,
War Office; Mr. T. J. Cash, War Office ; Mr. A. McDougall, War Office ;
Mr. J. D. Withinshaw, War Office; Mr. J. G. Leslie, War Office; Mr. S. B.
Leigh-Taylor, War Office ; Mr. E. C. Snow, War Office ; Mr. H. Birkhead,
War Office ; Mr. C. Burrage, Ministry of Munitions ; Mr. C. H. Grimshaw,
Board of Trade; Col. J. B. Kerslake, Department of Import Restrictions ;
Mr. J. J. Scott (Secretary), Mr. F. J. Marquis (Assistant-Secretary).

Representatives of Employers.—Mr. Harry Cockhill, Chairman of the
Federation of Leather Belting Manufacturers of the United Kingdom ;
Mr. H. Percy Densham, President of the United Tanners Federation of
Great Britain and Ireland; Mr. Owen Parker, President of the Incor-
porated Federated Association of Boot and Shoe Manufacturers of Great
Britain and Ireland; Mr. W. A. Posnett, Managing Director, Messrs.
Hepburn, Gale & Ross, Ltd.

Representatives of Labour.—Mr. W. Lilley, Secretary of the United
Society of Journeymen Curriers, Tablehands, and Machine Operators
of Great Britain and Ireland ; Mr. E. L. Poulton, Secretary of the National
Union of Boot and Shoe Operatives ; Mr. George Power, Secretary of the
Midland Leather Trades Federation; Mr. R. Siddle, Secretary of the
Amalgamated Society of Leather Workers.

Dressing Leather Prices Committee

Terms of Reference.—To advise the Department as to prices for various
tannages of dressing leather.

List of Members.— Mr. E. Penton (Chairman), Mr. S. Barrow,
Mr. S. F. Conolly, Mr. H. P. Densham, Mr. H. J. Mason, Mr. R. H. Posnett,
Mr. Leslie Ward.

Boot Prices Committee

Terms of Reference.—To advise the Department as to the prices to be
paid to various manufacturers of Army Boots.

List of Members.—Mr. E. Penton (Chairman), Mr. Owen Parker,
Mr. A. E. Marlow, Mr. C. Howell, Mr. Evans, Mr. G. B. Britton.

BOOT AND LEATHER COMMITTEES 425

Sole Leather Prices Committee

Terms of Reference.—To advise the Department as to the prices to be
paid for various tannages of sole leather.

List of Members.—Mr. E. Penton (Chairman), Mr. H. P. Densham,
Mr. A. Appleton, Mr. E. Lewis, Mr. H. Crockett, Mr. W. Sloane-Walker,
Mr. J. Weir.

The Limitation of Prices Sub-Committee
Terms of Reference.—To consider and report on the limitation of
prices of leather manufactured for other than Government purposes from
hides the price of which is controlled.
List of Members.—Mr. Densham, Mr. Bruce, Mr. Owen Parker,
Mr. Poulton, Mr. Cockhill, together with representatives of the War Office
and the Board of Trade.

Production of Harness, Accoutrement, and Belting Sub-Committee

Terms of Reference.—To advise the Department as to the measures
necessary to secure adequate production of harness, accoutrements, and
belting, with due regard to questions of Transport and Exchange.

Mr. H. R. Corner (Chairman), War Office; Mr. W. A. Posnett,
Managing Director, Messrs. Hepburn, Gale & Ross, Ltd.; Mr. Harry
Cockhill, Chairman of the Federation of Leather Belting Manufacturers
of the United Kingdom ; Mr. H. J. Mason, Messrs. D. Mason & Sons, Ltd. ;
Mr. George Fower, Secretary of the Midland Leather Trades Federation ;
Mr. J. T. Morrison, Secretary of the London Saddle and Harness Makers’
Trade Protection Society ; Mr. W. Lilley, Secretary of the United Society
of Journeymen Curriers, Tablehands, and Machine Operators of Great
Britain and Ireland.

The Production of Boots Sub-Committee

Terms of Reference.—To advise the Department as to the measures
necessary to secure the production of adequate supplies of boots.

Mr. E. Penton (Chairman), War Office ; Mr. Owen Parker, President
of the Incorporated Federated Associations of Boot and Shoe Manufac-
turers of Great Britain and Ireland ; Mr. A. E. Marlow, St. James’s Works ;
Mr. Percy Steadman, Derham Bros., Ltd.; Mr. T. F. Richards, President
of the National Union of Boot and Shoe Operatives; Mr. E. L. Poulton,
Secretary of the National Union of Boot and Shoe Operatives ; Mr. John
Buckle, National Union of Boot and Shoe Operatives.

The Regulation of the Imports of Hides and Skins and the
Distribution of British Hides Sub-Committee
Terms of Reference.—To advise the Department :
(1) On the adequacy of the existing or anticipated supplies of hides.
(2) On the importation of hides having regard to financial and
transport difficulties.

426 APPENDIX 6

(3) On the possibility of co-operating with the Allied Governments
in purchasing hides.
(4) On the regulation of the use of British and imported hides.

Mr. E. Penton (Chairman), War Office ; Mr. H. Percy Densham (Vice-
Chairman), President of the United Tanners Federation of Great Britain
and Ireland; Mr. C. R. Scriven (Representing Importers), Messrs. Scriven
Bros. & Co.; Mr. W. Coggan (Representing Distributors), London Butchers’
Hide Co.; Mr. S. Millar (Representing Tanners of Hides), Millars, Ltd. ;
Mr. J. A. Bruce (Representing Tanners of Skins), Harold Nickols, Ltd. ;
Mr. R. Siddle (Representing Labour), Secretary of the Amalgamated
Society of Leather Workers.

Sub-Committee on Distribution of British Market Hides
Mr. E. Penton (Chairman), War Office; Mr. H. Perey Densham (Vice-
Chairman), President of the United Tanners Federation of Great Britain
and Ireland; Mr. W. Coggan (Representing Distributors), London
Butchers’ Hide Co.; Mr. S. Millar (Representing Tanners of Hides),

Millars, Ltd.; Mr. J. A. Bruce (Representing Tanners of Skins), Harold
Nickols, Ltd.

The Production and Import of Materials required for the Production
and Dressing of Leather Sub-Committee

Terms of Reference.—To advise the Department as to the steps which
are necessary to secure the production and import of such materials as
are required for the production and dressing of leather required directly
or indirectly for military purposes.

Mr.S. B. Leigh-Taylor (Chairman), War Office; Mr. H. Percy Densham,
President of the United Tanners Federation of Great Britain and Ireland ;
Mr. T. W. Badgery (Representing Tanners of Skins), Ward & Company
(Worcester); Mr. J. G. Withinshaw (Representing Tanners of Hides),
The Penketh Tanning Co., Ltd.; Mr. E. E. Hodgkins (Representing
Curriers), Hepburn, Gale & Ross, Ltd.; Mr. W. Aitken (Representing
Importers yet to be appointed).

The Indian Kips and East African Hides Sub-Committee

Terms of Reference.—To advise the Department as to the steps
necessary to secure that supplies of Upper Leather are available, with
special reference to the use as raw material of Indian and East African
Hides.

Mr. E. Penton (Chairman), War Office; Mr. H. Percy Densham,
President of the United Tanners Federation of Great Britain and Ireland ;
Mr. W. L. Ingle, W. L. Ingle, Ltd. ; Mr. W. Lilley, Secretary of the United

Society of Journeymen Curriers, Tablehands, and Machine Operatives of
’ Great Britain and Ireland; Mr. R. H. Posnett, Highfield Tanning Co., Ltd.

BOOT AND LEATHER COMMITTEES 427

Chairmen of Local Committees advising on Boot Prices
Northampton County.—(a) Mr. Owen Parker, President of the
Incorporated Federated Associations of Boot and Shoe Manufacturers
of Great Britain and Ireland ; (b) Rushden, Mr. X. W. Horrell; (c) Ket-
tering, Mr. A. H. Bryan, Nelson Works.
Northampton Town.—Mr. A. E. Marlow, St. James’s Works,
Northampton.
Leicester Town.—Mr. W. Evans, Ashleigh Shoe Works, Leicester.
Leicester County.—Mr. W. Evans, Ashleigh Shoe Works, Leicester.
Leeds.—Mr. John Gray, Elmwood Boot Factory, Leeds.
Bristol and Kingswood.—Mr. P. Steadman, Messrs. Derham & Co.,
Bristol.
Scotland.—Mr. A. L. Scott, Messrs. Scott & Sons, Glasgow.
Chesham.—Mr. G. Barnes, Britannia Works, Chesham.
London.—Mr. George Pocock.

APPENDIX D7
BRITISH WOOL AREAS

Area 1. Devon, Cornwall, and Sussex, with Head-quarters at Exeter.
This Area includes a large wool-producing country, the annual clip amount-
ing to nearly ten million lb. or one-sixth of the total clip of England and
Wales. The greater part of the wool is of strong, coarse quality suitable
for combing into tops known as 32’s to 44’s prepared. The average weight
per fleece is over ten lb. Most of the wool is bought by six local firms who
are accustomed to comb, spin, and weave it themselves and sell the finished
article.

Area 2. Dorset, Hants, Wilts, and Berkshire, with Head-quarters at
Salisbury. The amount of wool grown in this Area is a little over three
million lb., the greater part consisting of fine short wool of 50’s to 58’s
carded quality, obtained from the Dorset Horn and Dorset and Hampshire
Down breeds. This Area differs from others in the prevalence of wool
auctions as the most popular method of sale. The flocks are large, in one
instance amounting to 15,000 head.

Area 3. Shropshire, Staffordshire, and Cheshire, with Head-quarters
at Shrewsbury. The bulk of wool in this Area is of the same quality as
the foregoing, but the total only amounts to two and a quarter million lb.

Area 4. Bucks, Northants, Leicester, Huntingdon, and Rutland, with
Head-quarters at Bedford. The total in this Area amounts to three
and a half million, half of which is short wool of the Down variety and half
long wool obtained from the Leicester breed, which is suitable for 32’s to
48’s prepared.

Area 5. The Counties of Gloucester, Oxford, Warwick, Worcester, and

428 APPENDIX 7%

Hereford, with Head-quarters at Worcester. This Area produces four
and a half million lb. of wool, two-thirds of which is of the fine short wool
variety grown on the Oxford and other Down breeds.

Area 6. Sussex, Surrey, Kent, and Middlesex, with Head-quarters at
Tonbridge. Five million lb. of wool are grown in this area, the qualities
being fairly evenly divided between long wools (32’s to 48’s prepared)
derived especially from the Romney Marsh breed in Kent, and short wools
(44’s to 58’s carded) from the Sussex Horn and Kent Down breeds.

Area 7. Essex, Norfolk, Suffolk, and Cambridgeshire, with Head-
quarters at Ipswich. Total clip three million lb., the bulk of which is
short wool obtained from sheep of the Eastern Counties Down breed.
This Area contained a farmers’ Co-operative Society which had made some
progress in organizing co-operative sale and ‘ casing’ of its members’
wool.

Area §. Was abolished in 1917 and was included in Area 10.

Area 9. Cumberland, Westmorland, and Lancashire, with Head-
quarters at Kendal. This Area produced three and a quarter million lb.,
half of which was of the Blackfaced variety, a coarse wool used principally
for carpets and blankets, and half long wool from the Border Leicester and
Cheviot breeds.

Area 10. Yorkshire, Nottingham, Derbyshire, and Lincolnshire, with
Head-quarters at Bradford. This Area, after the absorption of the original
Area 8, was the largest wool-producing district in England, the total clip
amounting to thirteen and a half million lb. There is a large variety of
qualities ; coarse wools such as Blackfaced and Lonk account for a million
and a half lb.; over ten million lb. are long combing wools, the bulk of
which comes from the long-woolled heavy fleeces of the Lincoln breed ;
and over a million lb. are fine short wools of miscellaneous breeds.

Area 11. Durham and Northumberland, with Head-quarters at
Newcastle. This area produced only two and a half million lb., the greater
part being Blackfaced, Border Leicester, and Cheviot.

Area 12. North Wales. Head-quarters at Newtown. Total clip three
and a half million lb.

Area 13. South Wales. Head-quarters at Brecon. Total clip two -
million Ib.

In these Areas the bulk of the wool is of a special variety obtained from
the small Welsh mountain sheep; the fleeces only weigh about two lb.
or less than one-third of the Lincoln and Devon breeds.

In addition to the above Areas in England and Wales, Scotland and
Ireland were separate Areas with Head-quarters in Edinburgh and Dublin
respectively. Scotland produces about twenty million lb. of wool, two-
thirds of which is Blackfaced, and the bulk of the remainder, medium
short wool grown on Cheviot sheep. In Ireland the total of thirteen
million lb. is about equally divided between medium long (36’s to 44’s
prepared) and medium short wools (44’s to 50’8 carded).

429

APPENDIX 8

MEMORANDUM ON CONTROL OF MEAT SUPPLIES
(June 6, 1917)

1. Objects of State Control

THE objects to be attained by State regulation of meat supplies appear
torbe:

(1) The reduction of prices and prevention of artificial inflation.

(2) Organization of the channels of supply and distribution to prevent
local shortages and ensure equitable distribution.

(83) Regulation of the rate of slaughtering for immediate consumption
and for building up a reserve in accordance with a definite policy
in relation to the food supply generally.

(4) The protection of milch and breeding stock from slaughter.

2. Outlines of Scheme

The proposed scheme of control is based on the experience gained in
the Government purchase of wool and control of the supply and distribu-
tion of hides. Executive Officers would be appointed in each county to
supervise the sending of cattle to the market and the distribution of cattle
at fixed prices to authorized butchers and salesmen. County butchers
in villages and small towns would be licensed by the local authority and
would be under the control of a Distribution Officer in each town. Retail
Butchers would buy at fixed prices and would be required to sell at maxi-
mum prices allowing a reasonable margin of profit.

The whole organization and control would be under the direction of
a central Statistical Office which would be responsible for regulating the
channels of supply and fixing the quota of cattle to be supplied from each
county.

3. Organization of Supply

The Central Meat Office would appoint in each County an Executive
Officer with considerable local knowledge and experience in the cattle
trade. He would correspond roughly to the District Executive Officers
under the Wool Scheme, who are responsible for controlling the purchase
of wool from farmers by authorized wool merchants. His duties would be :

(a) To keep records of the number of cattle and sheep on each farm
and to know the quantity available for slaughter from time to
time.

(b) To secure that the quota for his County, determined by the Central
Meat Office, comes forward for slaughter each week. He would
have powers of requisitioning to be held in reserve in case the
supplies coming forward were insufficient.

430 APPENDIX 8

(c) To supervise the dispatch of cattle to markets outside his Area in
accordance with the instructions of the Central Meat Office.

(d) To license country butchers to buy, where necessary, direct from the
farmers in the neighbourhood.

(ec) To control the distribution of beasts at fixed prices in the usual
cattle markets by authorized auctioneers or other authority.

This Officer should derive his executive power from the Central Meat
Office and should be advised by a small committee composed of agri-
culturists, cattle-dealers, and butchers. He would require a small staff
to keep records of the number of cattle on each farm, and should have the
power to call for returns and to enter upon farms for the purpose of
inspection. __

It would be the duty of the County Executive Officer to prevent the
slaughter of milch cows and breeding stock, and to see that the other
requirements of the Central Authority with regard to the selection of
cattle for slaughter were carried out.

He would supervise the cattle markets in his Area and would secure
that the beasts were sold according to the fixed schedule of prices to
authorized buyers in such a way that the existing channels of distribution
were maintained as far as possible. Distribution at the cattle markets
would follow the lines of the auctions at fixed prices adopted in the case
of wool and hides (see Appendix). The buyers present would buy in the
quantities which they were authorized to buy, and the auctioneer or other
officer superintending the market would arrange for an equitable distribu-
tion of the available supplies among the buyers present.

If the quantities coming forward to the cattle markets should exceed
the amount required at any time, the Executive Officer would buy on
behalf of the Central Meat Office either for cold storage or for dispatch
elsewhere, but he would be responsible for seeing that the rate of slaughter
laid down for his county was as far as possible observed.

4. Organization of Distribution

The problem of distribution is to secure that the quantity of meat
allotted by the Central Meat Office for each Area is distributed evenly
among the existing retail butchers, in accordance with the needs of the
population. Where the Local Authority was in a position to take control
of distribution, a Distribution Officer would be appointed by the Local
Authority. The Local Authority and the Distribution Officer would
derive executive power from the Central Meat Office. All retail butchers
would be required to register with the Local Authority and give particulars
as to their usual turnover and their normal channels of supply. Where,
as in London, they normally obtain their supplies through the wholesale
butchers or meat salesmen, they would be affiliated to the wholesaler and
obtain their supplies through him. In order to prevent fluctuations in

CONTROL OF MEAT SUPPLIES 431

demand, from retail butchers, the Local Authority might be given power
to introduce a system of registration of customers with the retail butchers
or to require orders to be placed a week or more in advance. Having fixed
the quota which each retail butcher or wholesale meat salesman may buy
each week, the Distribution Officer will be responsible for seeing that the
quota allotted to them was forthcoming. He would at once report any
deficiency in the supplies coming forward in the market to the County
Executive Officer, and if any temporary shortage cannot be made up from
his normal source of supply he should indent on the Central Meat Office
for emergency supplies to be sent from other areas or from cold storage.

It would be open to local authorities to take what steps they thought
fit to expedite and improve distribution, whether by opening municipal
shops, combining existing butchers for the purpose, organizing slaughtering,
or otherwise. Further, it should be within the power of the Local Authority
to adjust local retail prices so as to give the benefit of economies that
might be effected in this way to the consumer.

In dealing with the Metropolitan area it might be desirable, in view
of the complication of local government and the magnitude of the problem,
to set up a separate office which would purchase the whole of the supplies,
employing wholesale butchers and meat salesmen as authorized dealers
on a commission basis. If this were done it might be found desirable to
sell meat below cost price in the East End of London and to make up the
difference by increasing the price of the better qualities of meat sold in
the West End.

. 5. Price

In order to obtain any substantial reduction in the price of meat it
would be essential to fix the price of live cattle to the farmer. In this
connexion it might be pointed out that the price of hides fixed by the
War Office is 40 per cent. above pre-war prices and the price of wool is
now 50 per cent. above pre-war prices. The present prices of meat and
eattle show rises far in excess of these, and there is no doubt that substantial
reductions in the price of cattle might be made without inflicting any
hardship on the majority of farmers. The price might be based on corre-
sponding prices a year or two years ago with some allowance for increased
costs, but in this case some provision would have to be made for cases
where farmers have bought cattle in the last few weeks. It would not be
unreasonable to throw on the farmer in these cases the onus of proving
hardship, following the same procedure as has been adopted in the case
of extra allowance to the families of middle-class recruits who have been
called up and on whose families the usual rate of Army pay inflicts hard-
ships. The alternative is to allow the hard cases to determine the price
which the whole population has to pay for its meat, and this cannot be
defended.

It is of great importance that the scheme should start off with the
approval of the industrial population and the butchers, and this would be

432 APPENDIX 8

secured by an immediate and drastic reduction in prices. A drastic
reduction in price would not, as in other commodities, restrict supply.
By making it unprofitable to the farmer to continue fattening his existing
stock, it might even increase the available supply during the coming
months, when it is of the utmost importance that farmers should put more
land under the plough. At the same time, a low price of cattle would
discourage slaughter of milch cows and thus help to protect the milk supply.
If the effect of reducing prices were to encourage slaughter, it might be
possible to accumulate a reserve by increasing cold storage facilities
throughout the country. From the point of view of the food supply as
a whole a reserve of meat would be more economical than a reserve of
living cattle.

It is suggested that the price for the farmer should be fixed on the live
weight. In the absence of a weighing machine in the controlled cattle
market, an independent arbiter would be called in where the buyer and
farmer disagreed as to the valuation.

It is a matter for consideration whether the price should vary for
different breeds of cattle. It might in any case be desirable to discourage
the fattening of prime beasts by fixing a maximum price for all beasts
over a certain weight.

In order to get meat forward as rapidly as possible, during the months
in which grain is short, and to prevent any local shortages during the
inauguration of the scheme of control, it might be desirable to diminish
prices step by step during the next six months.

The price to the farmer should be based on the assumption that the
beast is delivered to the nearest market.

The wholesale meat price with allowances for the cost of cartage,
transport, warehousing, slaughter, and for the probable value of the offals
should be fixed so as to leave a reasonable profit to the salesman, and for
this purpose it might be necessary to fix different prices for London, for
large towns, and for country places.

Differences in the cost of transport might be met by fixing a flat price
for railway freight above a certain distance based on average costs.

The corresponding retail prices should also be fixed. These would
have to be independent of the breed of the animal since it would otherwise
not be possible to inspect adequately. By opening municipal shops or
employing butchers as agents on commission, retail prices for the cheaper
joints might be fixed lower in proportion than those for the better cuts.
There is no reason why the retail prices should be the same in different
areas. The London price need not dictate in a country town or vice versa.
Provided the prices of the beasts are fixed under the supervision of the
Central Meat Office, the local authority or the local distribution office
should adjust a standard scale of retail prices to the circumstances of the
particular area.

Determination of the relation between the wholesale price and the

CONTROL OF MEAT SUPPLIES 433

retail price is a matter for statistical examination of pre-war prices. They
should be fixed in such a way as to allow a reasonable profit based on
pre-war conditions adjusted to cover any increased expenses due to the war.

6. Functions of the Central Meat Office

The Central Meat Office would be divided into five main sections :

(1) Executive Control.

(2) Statistical Section.

(3) Transport Section.

(4) Storage Section.

(5) Imported Meat Section.

The Executive Control would appoint officers, lay down detailed rules
for their working, and be responsible generally for the organization of the
scheme, utilizing the information supplied by the Statistical Section and
the local officers.

The Statistical Section would, with the assistance of the local officers,
determine :

(1) The number of cattle approximately in each area.

(2) The number of cattle which may be slaughtered month by month,

(a) for the whole country, (b) for each area.

(3) The quantity allotted for consumption locally in each county
area and in the centres of population. This should in general
be based on the adult population.

(4) It should also correlate the supplies coming forward with the
demands and should keep records of movement of cattle with
a view to securing that transport is reduced to a minimum.

The Statistical Section is essential to the success of the scheme and
should be strongly manned. It should centralize all the information
available both on production and on consumption, and it should be in
a position to indicate to local officers where they should send their surplus
supplies and to distribution officers where they can obtain their supplies.
The work would be comparable to that which is already being done with
a much smaller problem in respect of hides.

The Transport Section would deal with (1) adjustment of railway
charges, (2) general transport difficulties.

It would be necessary to have a really competent railway man in charge
of this section. It would be the duty of the Transport Section, with the
assistance of the Statistical Section, to bring the actual transport to
a minimum.

The Storage Section would be responsible for the maintenance of re-
serves, for the increase of cold-storage accommodation, &c.

The Imported Meat Section would take over the existing functions of
the War Office, the Board of Trade, and other Departments in connexion
with importing meat.

1569.53 rf

43.4 APPENDIX 8

7. Advantages of scheme of control

The experience gained in the administration of the Wool Purchase
Scheme and the control of domestic hides proves that the most practicable
method of State regulation is to make use wherever possible of the existing
trade channels of supply and distribution, and to standardize these channels
in such a way that every farmer and authorized dealer knows at once
exactly where he is to send his produce and from whom he is to purchase
it. Every trader is then recognized as performing a service of national
importance, with the knowledge that his authority to deal may be cancelled
if he fails to carry out the instructions or evades the regulations imposed.

Such experience as we have had in the control of commodities and
a fairly close analysis of the German experience shows clearly the futility
of half measures. It is not enough to fix prices and to leave supplies and
distribution to take care of themselves. Either supplies are not forth-
coming, or the industrial districts fail to get their share, or supplies come
forward irregularly and serious waste occurs.

Further, it has become clear that it is much easier, more economical,
and more effective to control the whole supply than to control a portion.
This has undoubtedly been the case with wool, where the Department at
first took charge of only one-sixth, and it has been the case with most of
the German foodstuffs.

The amount of staff required for exercising the control would be
negligible compared with the total number of traders and butchers already
engaged in the meat trade. The Executive Officers and their assistants
would largely be drawn from public-spirited men already engaged in the
trade, and as many officers would probably give their services in an honorary
capacity, the expense should not be considerable. Under the Wool
Purchase Scheme, the administrative expenses are less than 0°5 per cent.,
whereas the gross profits of private merchants in normal times amounted
to 74-10 per cent. The additional cost of administrative control has been
more than offset by the reduction in the profits obtained by merchants

and middlemen.
K. F. WIsE.

(APPENDIX)

I. Memorandum on the Scheme for the Allocation of British Hides

(1) British hides are used for the production of (a) saddlery, harness,
accoutrement, &c., (b) sole leather, (c) upper leather, (d) belting leather,
(€) textile leathers, and (f) other mechanical leathers. In the past tanners
have obtained their supplies by arrangements among themselves, but the
heavy demands for native hides for purpose (a) and the desirability of
satisfying these demands from the leather of particular tanners has made
it necessary to allocate the 50,000 hides, which are available weekly, in
definite proportions to the above objects. Further, it is necessary to

CONTROL OF MEAT SUPPLIES 435

allocate the hides ear-marked for a particular purpose among the tanners
who are best able to tan them.

(2) The actual number and varieties of the hides which each tanner
is to obtain was settled in consultation with the British Market Hide
Committee, and it was found that the proposed new distribution of hides
among tanners differed considerably from that at present existing. Not
only are certain tanners to receive more or fewer hides than they do at
present, but in very many cases they are now to receive a different variety
of hide (e. g. a cow hide in place of ox) of a different weight (e.g. under
50 Ib. in place of 80-9 lb.). In order to effect the re-distribution accord-
ingly a good deal of statistical analysis was necessary.

(3) The organization of the hide industry is, in outline, as follows :

(a) There are about 100 registered hide markets scattered over the
country, which prepare the hides for sale in accordance with rules drawn
up before the war in consultation with tanners. These markets obtain
the hides by collection from the butchers, farmers, and slaughter-houses
in their district, or from a dealer who collects and sells to them.

(b) There are about 70 hide factors who purchase the hides from these
markets. In some cases one factor takes the whole production of a parti-
cular market and no other, but in most cases many factors purchase each
in a number of markets. Factors also occasionally purchase from the
dealer referred to in (a).

(c) There are about 300 tanners who purchase generally from the
factors, frequently direct from the hide markets, sometimes from the
dealer referred to in (a) and sometimes from the butcher or farmer.
The typical case is that in which a tanner purchases from many factors,
who also obtain hides for other tanners.

Tanners are ‘ approved’ to deal either direct with markets or with
factors, but only in exceptional cases (e.g. in sparsely populated areas)
will they be ‘approved’ to purchase from butchers or dealers, as no
control can be exercised over the condition of the hide in such cases.

(4) The statistics necessary to arrange the redistribution of hides were
as follows :

(a) From tanners (or factors buying for them) a statement in the
following form of their purchases from each market and from each factor
in a standard period (the month of March)—

Ox and heifer Ox and heifer Cow Cow Bull
firsts seconds firsts seconds firsts
Over 60— Under} Over 60-— Under | 601b. Under All All

90 Ib. 901b. 601b. | 90]b. 90 1b. 601b. | andover 60lb. | weights | weights
The divisions of weight referred to are determined by the purpose to which
the hide is to be put, e.g. ox and heifer firsts over 90 lb. to belting

leather, &c.
(b) From factors a statement in the same form of their sales to each

tanner and their purchases from each market.
Ff2

436 APPENDIX 8

(c) From Hide Markets a statement in the same form of their sales to
each tanner and to each factor. A certain amount of overlapping in the
information obtained from the three sources is evident, but this serves
as a check on the figures provided.

By means of this information we know exactly what each tanner has
been getting, as compared with what he is to get in the future, and also
of the channels through which he has been getting it. We know also the
hides available in each market and the channels through which they are
habitually distributed. These are all the elements necessary in order to
redistribute without disturbing the markets and factors. Knowing the
hides available in a particular market we allocate these to tanners who are
required to have the particular varieties present in that market. If the
hides required by a particular tanner can be obtained from his usual
markets no interference will take place, unless on grounds of shortening of
transport. Ifthe hides cannot be obtained from his usual markets, he will
be allocated these from other markets, which will be selected with a view
to shortening transport.

II. Auction of Wool at Fixed Prices

The usual method of selling imported wool in normal times is by public
auction in the Liverpool or London Sale Rooms. The wool is viewed in
bulk by buyers before the sale takes place and catalogues are issued
describing each lot of wool. Each lot is then put up to auction in the sale
room and knocked down to the highest bidder. It often happens, however,
that several buyers name the same price and not one of them is prepared
to go beyond it, in which case the broker chooses arbitrarily who is to get
the lot in question. The trade as a whole trusts the broker in such cases
not to show any favouritism and to give the unsuccessful bidders their
turn later on in the sale.

Under Government control the system of public sale has been con-
tinued, but the prices of every lot are fixed beforehand by a Government
valuer. As each lot is put up buyers, instead of bidding the price, hold
up their hands, and the broker knocks the lot down to whomever he thinks
fit, giving each a fair opportunity during the course of the sale to obtain
the quota which he is permitted to buy. Merchants and dealers are
not permitted to buy at the sales on their own account. Actual con-
sumers, and brokers acting on their behalf, apply beforehand for permits
to buy up to a certain quantity, and the permits issued are roughly
equivalent to the total quantity of wool to be disposed of at the
sale. As soon as one buyer has purchased his full quota, he drops out and
takes no further part in the sale.

There are very considerable advantages in this method of public
allocation at fixed prices. In the distribution of wool individual judgement
of quality is of the utmost importance and samples are never entirely

CONTROL OF MEAT SUPPLIES 437

representative of the bulk lots. The buyers therefore have an opportunity
of knowing exactly what they are buying. The clerical work of allotting
thousands of parcels is reduced to the minimum, and the invidious task
of deciding which individuai firm shall receive any lot where the demand
exceeds the supply is performed with the greatest publicity and in such
a way as to command the confidence of all concerned.

Distribution at fixed prices in the public sale rooms is also more
expeditious than sale by auction to the highest bidder. In the London
sale rooms under the new system as many as a thousand lots have been
distributed within an hour as compared with five or six hundred under the
system of competitive bidding.

The London Selling Brokers have formed a Committee to conduct the
sales on behalf of the Government, and as their success in business depends
on their maintaining a reputation for absolute impartiality and as the
whole distribution takes place in public no opportunity for unfair dis-
crimination or even for a suspicion of favouritism can arise.

APPENDIX 9

THE CATTLE (SALES) ORDER, 1917

Dated December 24, 1917 (No. 1336)

1. (a) No person shall on or after December 27, 1917, sell or buy or
offer to sell or buy any beast for slaughter unless the beast is at the time
of such sale or offer in a market.

(b) A beast shall be deemed to be bought for slaughter if it be

slaughtered within 28 days of the purchase.

2. No beast fit for slaughter shall on or after December 27, 1917, be
sold in any market except in accordance with the following provisions :

(a) The beast shall have been graded by a person authorized in that
behalf by the Food Controller as belonging to one of the four classes
mentioned in the schedule to this Order.

(b) The price shall not exceed the maximum price ascertained on
the basis of such grading in accordance with the provisions of the
schedule.

(c) The beast shall be sold only to a person who is authorized by the
Food Controller to buy in a market beasts fit for slaughter.

8. The determination of a person authorized in that behalf by the
Food Controller shall be conclusive upon the question whether a beast is
fit for slaughter, and as to the weight and value of any beast.

4, All persons concerned shall comply with any directions as to the
weighing of any beast or any other matter connected with the ascertain-
ment of the maximum price payable therefor which may be given for the
purposes of this Order by any person authorized in that behalf of the
Food Controller.

438 APPENDIX 9

5. The Food Controller may from time to time give directions as to
the measures to be taken in relation to the ascertainment of the maximum
price for any beast when he deems it is in his opinion expedient that a beast
should be sold on a dead weight basis or that for any reason the maximum
price should be ascertained otherwise than in accordance with the foregoing
provisions of this Order.

6. For the purpose of this Order :

‘ Beast ’ includes bulls, bullocks, cows, and heifers.

‘Market’ shall include fair, and any other place which the Food
Controller shall determine to be a market for the purposes of this Order.

This Order shall not extend to Ireland.

ScHEDULE or Maximum PRICES

Bulls, Bullocks, and Heifers

Grading Price per cwt.
1st Grade, 56 per cent., and over . : A 5 Wass,
2nd Grade, 52 per cent. to 56 per cent. . . : 70s.
3rd Grade, 48 per cent. to 52 per cent. . - : 65s.
4th Grade, under 48 per cent. 5 . s as valued

Cows
Grading Price per cwt.

lst Grade, 52 per cent. and over . : : 70s.
2nd Grade, 46 per cent. up to 52 per cent. : ; 62s.
3rd Grade, 42 per cent. up to 46 per cent. : - 53s.
4th Grade, under 42 per cent. : ‘ . as valued

Inferior cattle and all saleable cattle manifestly diseased will be placed
in the 4th Grade and valued accordingly.

The prices shown above may be modified if in the opinion of the person
grading the beast it is likely to yield an unusually small or large proportion
of bone.

APPENDIX 10

THE SHEEP (SALES) ORDER, 1918

Dated January 15, 1918 (No. 37)

1. (a) No person shall on or after the 28th January, 1918, slaughter any
sheep unless such sheep has within the fourteen days immediately preceding
the day of slaughter been sold and bought in a market.

(b) The restriction of slaughter imposed by this Clause shall not
apply to:
(i) Slaughter of a sheep under the powers conferred by the Diseases
of Animals Act, 1894 to 1914, or any Order made thereunder.
(ii) Slaughter of a sheep, if, in the opinion of a person authorized
by the Food Controller, or the Board of Agriculture and Fisheries, or

SHEEP (SALES) ORDER, 1918 439

the Board of Agriculture for Scotland, the slaughter is desirable for
any exceptional reason or purpose ; or

(iii) Slaughter by a farmer for consumption in his own household
of a sheep owned by him; provided that notice of such slaughter is
given within 7 days thereafter to the Food Control Committee for the

Baa in which the farmer resides.

2. (a) No person shall on or after the 14th January, 1918, sell or buy
or offer to sell or buy any sheep for slaughter unless the sheep is at the
time of such sale or offer in a market.

(b) A sheep shall be deemed to be bought for slaughter if it be

slaughtered within 28 days of the purchase.

3. No sheep fit for slaughter shall on or after the 14th January, 1918,
be sold in any market except in accordance with the following provisions :

(a) The sheep shall have been valued by a person authorized by
the Food Controller to aseertain its fair value ;

(b) The price shall not exceed the fair value so ascertained ; and

(c) The sheep may be sold only to a person who is authorized by
the Food Controller to buy in a market live stock fit for slaughter.

4, For the purpose of ascertaining the fair value the person authorized
under the preceding clause shall estimate the dressed weight of the carcass
of the sheep, and the fair value of the sheep shall be a sum at the rate of
1s. 24d. per lb. on the weight of the dressed carcass as so estimated together
with the current market value of the skin as estimated by such person,
less the sum of 1s. 6d.; provided that in any particular case such person
may determine that a sheep shall be sold on the footing that the actual
dressed weight of the carcass shall be taken in lieu of the estimated weight.

5. The determination of the person authorized in that behalf by the
Food Controller shall be conclusive upon the question whether a sheep is
fit for slaughter and as to the weight and fair value of any sheep.

6. All persons concerned shall comply with any directions given as
to the weighing of any sheep, and as to the method of sale, whether in lots
or otherwise, of any sheep, and as to any other matter relating to the
maximum price which may be given for the purposes of this Order by any
person authorized in that behalf by the Food Controller.

7. For the purpose of this Order : .

‘Market’ shall include fair, and any other place which the Food
Controller shall determine to be a market for the purposes of this
Order.

‘Sheep’ shall mean any ovine animal.

‘ Dressed carcass’ shall mean the carcass without the skin, head,
pluck, intestines, loose fat, feet, and shanks, the feet being cut
off at the hocks and the shanks at the knees.

This Order shall not be extended to Ireland.

440

APPENDIX 11
CIRCULAR LETTER TO OIL SEED CRUSHERS

Ministry of Food
(Oils and Fats Branch),
St. Stephen’s House,
Westminster,
S.W.1.
November 29, 1917.
GENTLEMEN,

I am directed by the Food Controller to enclose herewith copy of an
Order requisitioning the output of all crude oils, oilcakes, meals, and
residues produced in your seed-crushing or extracting plants.

2. This Order is made under Regulation 7 of the Defence of the Realm
Regulations, which provides that in default of agreement the price shall
be determined on the basis of the cost of production and the normal
pre-war rate of profit, but after discussion with the Crushers’ and Refiners’
Advisory Committee it has been agreed in lieu thereof that Crushers and
Extractors will work at the margins set out in the attached schedule.

3. In order to provide the agreed margin it is necessary to readjust
the selling prices of oilseeds, nuts, and kernels, so as to make them corre-
spond with the maximum prices of oils, oileakes, and meals.

4, The Food Controller has therefore taken possession of all oilseeds,
nuts, and kernels in the United Kingdom, including those held by Crushers
and Extractors as on December 1, 1917, and will release them to manu-
facturers on payment of the difference between the present maximum
prices and the readjusted prices, which are now being fixed in consultation
with the Crushers’ and Refiners’ Advisory Committee and which may be
varied from time to time. The readjusted prices will include delivery
ex ship at the usual port or ex ship or ex rail at nearest port or station in
case of transit from any other port, and are the same throughout the
United Kingdom.

5. The ‘ agreed margin’ is understood to mean a sum of money per
ton of seed which, when added to the net cost of a ton of naked seed ex
ship or rail at the point of delivery, represents the selling price of the
resultant products net naked in bulk at the mill.

6. The above margins will be in force for a period ending March 81,
1918, and at the end of that period will again be subject to revision.

7. 1 am to request you to acknowledge receipt of this letter and to
confirm that you are willing to accept the above basis of settlement in
accordance with the recommendations of the Crushers’ and Refiners’
Trade Advisory Committee.

8. In the meantime I am to request you to carry on your manufacturing
operations as usual and to continue dealing with your unsold products and

LETTER TO OIL SEED CRUSHERS 441

carrying out your existing contracts pending further instructions and
subject to the necessary adjustment with the Ministry of Food at a later
date.
I am, Gentlemen,
Your obedient Servant,
(Sgd.) ALFRED MANSFIELD,

Director.
SCHEDULE

Babassu seed . “ : : ‘ ‘ : 60s.
Castor seed : ; : ; ‘ ; , 50s.
Copra 5 : : : 5 ‘ ‘ : 60s.
Cotton seed : ; ‘ ; ; 3 ‘ 50s.
Gingelly (Sesame seed) ; : : . 9 70s.
Ground nuts (undecorticated) : : : : 50s.

+», (decorticated) . ‘ ; F ‘ 60s.
Hemp seed : : : ; , : : 50s.
lilipe : ‘ A é é : . : 60s.
Kapok seed é A : : : pt 50s.
Linseed . : ; ‘ j : : : 45s,
Mowrah seed. 5 ; : : ‘ : 70s.
Niger seed ; : : : F ‘ 5 45s.
Palm kernels. : , : : : 4 70s.
Poppy seed : 5 5; : : : ‘ 60s.
Rapeseed . ; 3 : 5 ; é : 60s.
Shea nuts . : : ; : : : : 60s.
Soya beans : ; ; : . : : 55s.
Sunflower seed . : ; : : : ‘ 50s.

STATUTORY RULES AND ORDERS
Defence of the Realm
MINISTRY OF Foop

The Seeds, Nuts, and Kernels (Requisition) Order, 1917, dated November 1917, made
by the Food Controller under the Defence of the Realm Regulation

In exercise of the powers conferred upon him by the Defence of the
Realm Regulations, and of all other powers enabling him in that behalf
the Food Controller hereby orders as follows :

1. (a) In pursuance of Regulation 28 of the Defence of the Realm
Regulations, the Food Controller gives notice that he hereby takes posses-
sion of all oleaginous seeds, nuts, and kernels of the varieties mentioned
in the Schedule of this Order which are in the United Kingdom on the
1st December, 1917.

(b) This Clause shall not apply to seeds, nuts, and kernels in the
hands of a person who at the close of business on the 30th November, 1917,
does not hold more than 5 tons of any one variety.

2. (a) In pursuance of Regulation 2¥F of the Defence of the Realm
Regulations, the Food Controller requires all persons owning or having
power to sell or dispose of any oleaginous seeds, nuts, and kernels of the
varieties mentioned in the said Schedule which may arrive in the United

442 APPENDIX 11

Kingdom after the 1st December, 1917, to place the same at the disposal
of the Food Controller and deliver the same to him or to his order.

(b) Any Arbitrator to act for the purpose of this Clause shall be
appointed by the Lord Chief Justice of England.

3. All persons concerned shall, on or before the 8th December, 1917,
furnish to the Secretary, Ministry of Food, Palace Chambers, S.W.1,
a return showing :

(a) the amount of seeds, nuts, and kernels mentioned held by him
at the close of business on the 30th November, 1917 ;

(b) the amount of such seeds, nuts, and kernels afloat and shipped
to the United Kingdom to him or to his order on the 30th
November, 1917 ;

(c) the amount and quality of seeds, nuts, and kernels purchased
to be shipped to the United Kingdom and not shipped on the
30th November, 1917; and

(d) the quantity sold and unsold in each case ;

and shall furnish such other particulars as may from time to time be
required by or under the authority of the Food Controller.

4. Infringements of this Order are offences against the Defence of the
Realm Regulations.

5. This Order may be cited as the Seeds, Nuts, and Kernels (Requisi-
tion) Order, 1917.

By order of the Food Controller.

(Signed) W. H. BEVERIDGE,
Second Secretary to the Ministry of Food.
November 1917.

SCHEDULE

Babassu seed Linseed
Castor seed Mowrah seed
Copra Niger seed
Cotton seed Palm kernels
Gingelly (Sesame seed) Poppy seed
Ground nuts (undecorticated) Rapeseed

» » (decorticated) Shea nuts
Hemp seed Soya beans
Ilipe Sunflower seed

Kapok seed

APPENDIX 12

JOINT EXECUTIVE FOR VEGETABLE OILS AND OIL SEEDS
MEMORANDUM OF AGREEMENT

1. There shall be set up a Joint Executive for Vegetable Oils and Oil
Seeds representing the United Kingdom and France (hereinafter called
the Oil Seed Executive) for the purpose of controlling the purchase and
supply of the scheduled articles from British and French territories and
other countries Allied or Neutral, of co-ordinating control of selling prices

VEGETABLE OILS AND OIL SEEDS 443

in the United Kingdom and France, of allocating the scheduled articles
in agreed proportions between the two countries and of selling them to
third parties Allied or Neutral.

2. The Oil Seed Executive shall consist of an equal number of repre-
sentatives of the United Kingdom and France, and, subject to the authority
of the respective Governments, shall have full power to act on behalf of
those countries.

3. The articles shall be oleaginous nuts, seeds, and kernels and vegetable
oils and fats, but the Oil Seed Executive may in agreement with the
Inter-Allied Meat and Fats Executive add to the schedule any Animal Oils
and Fats (including fish and marine animal oils) or their products that
appear to be most conveniently dealt with by the Oil Seed Executive.

4. Subject to the limits and conditions of the financial resources placed
at the disposal of the Oil Seed Executive by the British and French
Governments, the Oil Seed Executive ‘shall have full power to meet the
requirements of the two Allies by the purchase and allocation of the sche-
duled articles and to make arrangements for the transport of such articles
with the competent Departments of the respective Governments.

5. No sale shall be made by the Oil Seed Executive to Neutral countries
which is contrary to the blockade policy pursued by the Allied countries.

6. The Oil Seed Executive shall as soon as possible draw up an approxi-
mate estimate of the supplies of each of the scheduled articles required
to be imported by France and the United Kingdom over a stated period.
The proportion which the requirements of each Ally bears to the sum of
the requirements of the two Allies for each article shall for the purposes
of this convention be termed the ascertained proportion for each country.

A separate ascertained proportion may be specified for any single
country of origin or for any one of the scheduled articles.

The total purchases shall be allocated as nearly as possible on the basis
of the ascertained proportions provided that military requirements shall
have preference over civilian requirements.

7. The ascertained proportions may be varied by mutual consent from
time to time having regard to the total stocks of each article held by each
of the Allied countries, and in accordance with the relative urgency of
their needs and with the amount of tonnage at their disposal.

8. The Oil Seed Executive shall draw up a programme of purchases
to be made in the various countries of origin, having regard to the export-
able surplus available in each country and to the importance of purchasing
in countries which offer the best transport facilities.

9. The total cost of purchases of each of the scheduled articles shall be
averaged in each country of origin subject to the necessary allowances
being made for grade and quality, and final adjustment shall take place
at an annual date to be fixed by the Oil Seed Executive. The principle of
sharing profits and losses on the basis of f.0.b. prices is accepted by the
two Governments subject to satisfactory financial arrangements being

444 APPENDIX 12

settled in a separate memorandum to be drawn up by the Oil Seed Execu-
tive for the approval of the Financial Authorities of the two Allied
Countries.

10. Each Ally shall have a claim to priority of allocation in the case
of purchases for which he is providing the credit, but for the purpose of
economizing tonnage a provisional character only shall be attributed in
the first instance to such allocation. Any allocation made by the Oil Seed
Executive shall determine only the financial and tonnage obligations of
each Ally, but not the actual destination of the goods, which may be varied
by mutual agreement to any extent provided that such variation shall not
finally benefit any Ally at the expense of the other.

11. Subject to any general arrangements as to shipping or finance
made between the competent departments of the two Allied Governments,
the transportation of and payment for the supplies of the scheduled articles
for each Ally shall be undertaken by that Ally.

12. The Oil Seed Executive shall be furnished with full information
as to production, stocks, and consumption of the scheduled articles and
will be empowered by the respective Governments to obtain such other
information as may be necessary for the performance of their functions.

13. For the purpose of finance orders to be placed by or on behalf of
the Oil Seed Executive will fall into five groups :

(1) Orders in United States.

(2) A ,, Canada.

(3) », elsewhere in the British Empire.

(4) », 1 French Colonies.

(5) » in other Allied Countries or in Neutral Countries.

In the event of any orders being placed on behalf of the Oil Seed
Executive by His Majesty’s Government or by any British Government
Department or being taken over by the Oil Seed Executive from orders
already so placed, the following procedure will be followed :

In the case of purchases made on behalf of the French Government
under groups (1) and (2) the French Government will undertake to place
dollars at the disposal of the British Treasury in New York at least seven
days before the relative payments fall due and the British Treasury will
be notified by the Oil Seed Executive, these dollar transfers being addi-
tional to and independent of any other financial agreements between the
Governments concerned.

Where purchases are to be made on behalf of the French Government
under groups (3) and (5) the proposed purchases will be referred to the
British Treasury through the Commission Internationale de Ravitaillement
before they are made and will be contingent on a statement being received
from them that arrangements have been made with the French Govern-
ment for provision of funds either out of British credits or for reimburse-
ment in dollars or in some other way.

14, The French Government having drawn the attention of H.M.

VEGETABLE OILS AND OIL SEEDS 445

Government to the ditficulties caused by the present disparity in the prices
of raw materials in the two countries, it is agreed that the Oil Seed Execu-
tive shall examine the causes of such disparity with a view to seeing how
far it will be practicable to remove it.

15. This agreement is subject to cancellation at three months’ notice
by either party.

MEMORANDUM

In connexion with the above agreement the delegates of the French
Government desire to draw attention to the particularly serious situation
existing in France on the date hereof owing to the extreme shortage of
vegetable oils and oilseeds.

APPENDIX 13

MINISTRY OF FOOD
Costings Department
OILS AND FATS

Memorandum of Instructions to the District Supervising
Accountants for ascertaining costs of :

(a) Crushing (or Extracting)
and (b) Refining.

(a) CRUSHING PROCESS :

The following is an outline of statistics to be furnished from the
cost investigations of crushing processes relating to:
(1) Palm kernels,
(2) Ground-nuts,
(3) Cotton seed,
(4) Linseed,
for the following periods :
(a) The last three pre-war years,
(b) The last two completed financial years.
The statistics for each class of seed to be stated separately.

I. Purchase of seeds at cost ex quay (port of entry) Tons £
Average price per ton.

II. Carriage and other inland transport on seed. Tons. £
Average cost per ton.
Ill. Adjustment for stocktaking. IMT BS

Increase or decrease in stocks at end of each
period investigated.

446

ARE

Vill.

IX.

XI.
XT,

APPENDIX 13

- Quantity of seed crushed. Tons £&

Average price per ton.

. Financing of stocks. (See Nore 2.)

Average cost per ton.

. Crushing wages (direct). Tons. &

Average per ton.

General charges :
(a) Process and general charges detailed.
(b) Selling charges detailed (barrels, lighterage, filling, and
delivering, &c.).
(c) Average process and general charges per ton.
(d) Average delivering and selling charges per ton.
A distinction to be made between (a) and (b) if possible of

ascertainment.
Total crushing and general charges per ton.
Carriage and inland transport as above £
Financing of stocks do. £
Direct wages do. z
Process and general charges do. £
Selling charges do. £ :

Total quantity of oil and cake obtained.
(a2) Quantity of oil obtained.
(b) Quantity of cake obtained.
(c) Total quantity of oil and cake obtained per ton.
(1) Quantity of oil per ton.
(2) Quantity of cake per ton.

. Total sales—crude oil and cake. Tons £

a) cade oil.

d) Average selling price of cake (per ton of cake sold).
e) Average selling price of oil (per ton of oil sold).

(1) Value of oil obtained from 1 ton of seed.

(2) Value of cake obtained from 1 ton of seed.

Net profit.
Net profit per ton crushed.
Arrived at thus:
Total receipts from one ton of seed

Less cost of raw seed per ton
and total crushing and general charges per ton

(
(
(c) Total receipts from 1 ton of seed.
(
(

th | ih

Leaving net profit per ton :

OILS AND FATS 447

(6) REFINING PROCESS.
The following is an outline of statistics to be furnished from the
cost investigations of refining processes relating. to :
(1) Palm oil (crude),
(2) Ground-nuts oil (crude),
(3) Cotton-seed oil (crude),
(4) Linseed oil (crude),
for the following periods :
(a) The last three pre-war years,
(b) The last two completed financial years.
The statistics for each class of crude oil refined to be stated
separately.

I. Purchase of crude oil at cost Tons £
Average price per ton. *

II. Carriage and other inland transport on crude oil Tons £
Average cost per ton.

III. Adjustment for stocktaking. Tons £ :
Increase or decrease in stocks at end of each period
investigated.
IV. Quantity of crude oil refined. Tons £

V. Financing of stocks. (See NoTE 2.)
Average cost per ton.

VI. Refining wages (direct). Tons £
Average per ton.

VII. General charges :

(a) Process and general charges detailed.

(b) Selling charges detailed (barrels, lighterage, filling, and
delivering and brokerage).

(c) Average process and general charges per ton.

(d) Average delivering and selling charges per ton.

A distinction to be made between (a) and (b) if possible of
ascertainment.

VIII. Total refining charges per ton.

Carriage and inland transport as above £
Financing of stocks do. x
Direct wages do. £
Process charges do. £
Selling charges do. £

448 APPENDIX 13

IX. Total quantity of refined oil and by-products obtained.
(a) Quantity of refined oil obtained.
(b) Quantity of by-products obtained.
(c) Total quantity of refined oil and by-products obtained
per ton.
(1) Quantity of refined oil.
(2) Quantity of by-products.

X. Total sales—refined oil and grease (including all by-products).

(a) Refined oil.

(b) By-products.

(c) Total receipts obtained from 1 ton of crude oil.

(d) Average selling price of by-products (per ton sold).

(e) Average selling price of refined oil (per ton sold).
(1) Value of refined oil obtained from 1 ton of crude oil.
(2) Value of by-products obtained from 1 ton of crude oil.

XI. Net profit.

XII. Net profit per ton refined.
Arrived at thus :
Total receipts from 1 ton crude
Less cost of crude oil per ton
and total refining charges per ton

th th hH

Leaving net profit per ton

GENERAL NOTES

1. Unless otherwise stated the unit will be taken as one ton of seed
crushed for the crushing costs, and one ton of crude oil refined for refining
costs.

2. Charges for Bank Interest, &c., incurred in purchasing seed will
be stated under ‘ Financing of Stocks ’.

3. Where crushing and refining are carried on by the same proprietors
the separate costs for each process will possibly not be kept apart. In
such cases the immediate purpose of the investigation will be served if an
estimated allocation can be made between the costs for each process and
the basis of such estimate verified. Where the crude oil is obtained by
extraction the relative costs will be ascertained as indicated for crushing.

4. A further apportionment will then be necessary to allocate the
various costs between the different classes of seed crushed or crude oil
refined. If an estimated allocation has to be made the basis of the
estimate should also be verified.

5. Sales should be stated net, i.e. after deduction of carriage, &c.,
charged to customer.

6. Where any charges are taken into cost.on a percentage basis or

OILS AND FATS 449

otherwise, the total amount so charged should agree with the actual
amount incurred as shown in the financial books.

7. The following items should be excluded in arriving at cost :

(1) Income Tax and Excess Profits Duty.

(2) Interest on capital, loans, and debentures.

(3) Expenses of raising capital, loans, and any other item of expenditure

relating to capital.

8. A summary of the financial accounts and balance-sheet for each of
the years investigated should accompany the report. These accounts
should show inter alia the following items of general charges :

(1) Bad debts written off or reserved for.

(2) Commissions and Brokerage.

(3) Depreciations.

(4) Repairs and Maintenance.

(5) Rent or charge in lieu thereof where property owned (in latter case

charge not to exceed Sch. A. Assessment).

(6) Directors’ or Partners’ Remuneration.

(7) Reserves or sinking funds for Redemption of Leases, &c.

(8) Any large item of expenditure of a non-recurring or exceptional

nature charged as a working expense.

(9) Discount and Interest other than interest on fixed loans, capital,

and debentures ;
and should also show the figures :

(1) As shown by the books.

(2) As adjusted in terms of above memo.

A print of the Directors’ Report and Accounts for the financial periods
under review should also be furnished.

APPENDIX 14

LETTER FROM LORD RHONDDA TO THE SECRETARY OF
THE MINISTRY OF FOOD ON STATE PURCHASE OF THE
WHOLESALE MILK TRADE

Llanwern,
Newport, Mon.
May 21, 1918.
My DEAR WINTOUR,

I return the papers relating to Major Astor’s report on the control of
the wholesale milk trade, which I received yesterday. I have not made
any note on the file, for, having regard to the arrangements made with the
Prime Minister and Mr. Clynes under which the latter is responsible for
the work of the Food Ministry during my convalescence and until I return
to the Office, I feel that I should not express any opinion that might
prejudice any decision that he might wish to come to. You might,

1569.53 Gg

450 APPENDIX 14

however, convey to him my personal view that, while I think the control
of the wholesale milk trade should be taken in hand without delay and
on the lines suggested in the scheme, I should hesitate to commit myself
to State Purchase without first obtaining the sanction of the Cabinet.
I cannot help thinking, however, that the distribution of milk, like the
distribution of many other articles of consumption, lends itself to communal
or State handling, and I think it would be desirable, and could not, as
far as I can see, be in any way prejudicial, to obtain options or reasonable
terms for purchase before the control was exercised.

I think it is to be regretted that so much publicity has been given in
the Press to the proposal of State Purchase before the matter came before
the Ministry of Food for decision.

I am looking forward to seeing you on Friday if that day suits you.

Yours very faithfully,
(Sgd.) RHonpDDA.

JUTE PRICES 1914-16

o—o Raw Jute & per ton. First Marks Near Shipment
+ Jute Yarn SD. per Spindle 8/b Common Cops Near Delivery

—— Hessian Cloth Fence per ya. 40inches. 0 ozs.

th \\ Average Price oa

(Oo Requisition Price

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INDEX

Aberdeen, 243.

Accountants, 46, 98, 114, 317-21; Dis-
trict supervising, 211; instructions to,
249, 445,

Adam Smith, 282.

Administration, improvements in, 12, 13;
methods of, 16, 27, 73-5, 82, 102, 110,
111, 180, 312-14, 358, 389, 392.

Admiralty, 50, 54-6, 62, 68, 355.

Advisory Committees, 3438, 353, 392;
Contracts, 59; flax, 70; boots and
leather, 109, 110, 424—7 ; wool, 129, 133,
138, 141; wool textile, 150, 151, 273,
274; livestock and meat, 172, 174, 176;
Area live stock, 180, 184 ; Seed Crushers
and Refiners, 208, 210-17; Oijlseed
Brokers, 208, 218 ; Soap Manufacturers,
208; West African merchants, 208 ;
Margarine Manufacturers, 208; tallow
and fats, 242-4; milk, 251; farmers,
343.

Agency agreements, 367-9; jute goods,
44; flax, 69; jute, 80-2; hemp, 89;
kips, 108; wool, 122, 128, 135-7, 149 ;
meat, 173, 177; oilseeds, 218, 219;
milk, 250; butter and cheese, 255, 257.

Agricultural, Commissioners, 171; Cost-
ings Committee, 335; Council, 343 ;
produce, control of, 329, 331-46;
prices, 332-40 ; marketing, 340-3, 379,
385; representation, 343, 344. See also
Wool, Meat, Milk.

Aireraft Production Department, 76.

Albert, Prince, 12.

Alexandria, 48, 226.

Allied armies, 19, 91, 92, 113, 272.

Allied Governments, competition of, 19,
94; co-operation between, 20, 44, 47,
62, 86, 91, 110, 221-4, 280.

Allied Maritime Transport Council, 279,
280.

Allocation, of clips, 137-9; of contracts,
150; of live stock, 182; of profits, 320.

* Allocator’, 194.

American, competition, 89; boot manu-
facturers, 93; purchases of wool, 116 ;
meat companies, 161, 188. See also
United States.

Appeals, from farmers, about wool pur-
chase, 134, 142.

Arbitration, before a judge, 40, 57-9;
commercial, 87 ; in wool purchase, 134.

Archangel, 68, 71, 307.

Area Meat Agent, 185, 186.

Area Meat Distribution
185-7.

Areas, British wool, 129, 131-3, 135, 138,
427-9 ; live stock, 163, 171, 180-8, 191.

Argentine, hides, 106 ; oilseeds, 203, 227 ;
butter, 255, 257, 301, 304.

Armament firms, 16, 23, 261, 262.

Army, see British Army.

Army, Act, 37, 52; Boot Department, 95 ;
Cattle Purchase Committee, 160, 167,
169, 175 ; Contracts Department, 13-16,
19-25, 29, 69, 123, 270, 274, 317, 355;
Council, 15, 21, 50, 53-6, 62, 355;
factories, 16 ; Forage Department, 338 ;
Medical Corps, 24; Ordnance Depart-
ment, 99, 137, 323 ; Service Corps, 178,
323 ; Supply in the past, 6-17.

Associated Meat Importers Committee,
185, 188.

Associations, Trade, 32, 33, 283, 305, 351—
53, 380, 396 ; Baled Jute Shippers, 81 ;
Boot Manufacturers, 92, 110, 276, 283;
Calcutta Jute Mills, 48; Flax Spinners
and Manufacturers, 71; Linseed Oil
Consumers, 351; London Jute, 81;
Margarine Manufacturers, 351; Soap
Manutacturers, 351; Tallow Melters
and Bone Users, 190, 241-4; United
Kingdom Oilseed Brokers, 218, 219,
226, 305-7, 351, 369; United Kingdom
Oilseed Crushers and Refiners, 351;
United Tanners, 92, 101, 103, 106, 110,
284, 364; Wholesale Clothiers, 32, 112,
276, 283, 353 ; Wholesale Meat Supply,
173, 182, 185, 187, 193, 218, 364, 369.

Astor Committee, 247-51, 449.

Auction, of wool at fixed prices, 122, 436 ;
English wool, 127; live stock, 158, 430.

Auctioneers, wool, 126; live stock, 160,
180, 183; Institute, 160, 181.

Australia, 296, 302, 306, 385; shortage of
wool, 116; purchase of wool, 120, 295 ;
meat, 155, 160, 192, 196, 200, 295;
oils and fats, 225, 228; butter and
cheese, 253-7.

Austria, 107, 287.

Authorized, collectors, 136; wool mer-
chants, 135-8, 365-7 ; slaughter-houses,
190, 191.

Committees,

Bacon, 309, 332.
Baking, cost of, 327.
Baltic, 67.

Bank of England, 297.

4.56

Barclay’s Bank, 195,

Bathurst, Capt., 156.

Bedford, 427.

Beef, see Meat.

Belfast, 67, 70, 77, 127.

Belgium, 48, 66, 76, 103.

Blue Book rates, jute, 79, 80; hemp, 89;
oilseeds, 224, :

Board of Agriculture, 77, 156, 169, 174,
247, 278, 335.

Board of Control, see Control Boards.

Board of Trade, 20, 95, 253, 254, 278, 300.

Book-keeping, 211.

Books, compulsory examination of, 59-61.

Boot Manufacturers Federation, 92, 110,
276.

Boots, 91-100 ; scandals in Crimean War,
11; numbers produced, 91; normal
requirements, 93; depot, 95; repairs,
99; war-time, 25, 92, 99, 100, 286;
Advisory Committees, 424.

Boys, Sir Francis, K.B.E., 172.

Bradford, 127, 148, 150, 273, 340, 370.

Bribery, see Corruption.

British Army, 7-14, 18-20, 24, 32-6, 41,
91-5, 102, 113, 118, 123, 151, 156, 168-9,
200, 232, 266, 271, 300, 310, 311, 341.

Buckley, Mr. Wilfred, C.B.E., 247.

Business men, 28, 95, 102, 125, 152, 314,
393-5.

Business methods, 28, 70, 73-5, 82, 83,
102, 305, 312, 395.

Butchers, 103, 241, 242 ; number of, 161 ;
threatened strike, 176; Committees,
186, 380.

Butter, imports, 231-3, 301; home pro-
duced, 232; control of, 253-8, 291, 309.

Butter and Cheese Imports Committee,
255-8, 305, 309, 369.

Butter Import Corporation, proposed, 314.

Calcutta, 43, 47, 48, 79, 81, 82, 308, 373.

Canada, flax-seed, 71, 77; butter and
cheese, 256; food purchases, 303;
grain growers, 339, 385.

Censorship, Postal, 116, 119.

Census, woollen industry, 115; British
wool, 129, 1382; live stock, 166, 183;
milk, 245.

Ceylon, 226, 303.

Chairmen of Auctioneers, 180-3, 187.

Cheese, Control of, 253-8 ; price of, 291.

Chesterton, Mr, G. K., 282.

ce Executive Officer, for wool purchase,

Chief Live Stock Commissioner, 181, 189.

Chief Meat Agent, 186, 189.

Chief Supervisor of Slaughtering, 189, 191.

Chicago, 375.

Civil Servants, 13, 16, 189, 393-5.

INDEX

Civil Service, see Administration.

Clearing-house system, 379; jute, 45;
margarine, 236, 370, 380; milk, 249,
250.

Clothing, 7, 11, 19, 26, 30, 32, 113, 150;
Standard, 25, 152-4, 349.

Clynes, Mr. J. R., 162, 257, 449.

Colonial Office, 220, 221.

Combination, see Unification.

Commission Internationale de Ravitaille-
ment, 19, 94, 399.

Compensation, 50-6, 181, 355.

Competitive tendering, 15, 19-21, 26-34,
263.

Complaints, by farmers, see Appeals.

Conscription, 5; of industry, 260; of
labour, 270; of wealth, 298.

Contracts, see Army Supply, Competitive
tendering, Agency agreements.

Contracts Advisory Committee, 59, 60.

Control, see Prices, Quality, Costings
system, Profits.

Control Boards, 354; flax, 76-8, 280;
wool textile, 152, 280, 349; Smithfield,
191-5, 369 ; cotton-seed, 226, 303, 307 ;
milk, 251.

Controller and Auditor-General, 73-5.

Co-operativeSocieties, 161, 398; slaughter-
houses, 191; milk factories, 250, 251 ;
farmers’, 340, 341.

Corruption, 2, 6-10, 13, 16.

Costing, 34, 40, 46, 58-60, 97, 105, 316-21.

Costings Department, 210, 318, 445.

Costings system, 316-30, 359; origin of,
40-6, 263; legal basis, 60, linen; 70;
boots, 97, 98, 100; wool textile, 115,
149; oils and fats, 210, 445; agricul-
ture, 333.

County Agricultural Committees, 332.

Court of Appeal, 51.

Crimean War, 11, 12, 92.

Crown, rights of, see Royal Prerogative.

Crown Colonies, 303, 313, 375.

Crushers, oilseed, 202, 210-19, 440.

Dawkin, Sir Clinton, 14.

Dead-weight system, 158, 174, 189-91,
346.

Decentralization, Self-
government,

Decontrol, 71, 154, 388, 390.

de Fonblanque, cited, 9-11.

Defence of the Realm Act, 50-64, 352,
355; Regulations, 46, 97, 216, 341;
Regulation 7, 40, 56-60, 97, 216, 263,
319; Regulation 2B, 53-5, 104, 441],
263; Regulation 30 4, 61-3; Regula-
tion 2 E, 63, 106; Regulation 2 F, 263,
441; Regulation 2 a, 319.

380, 392; see

INDEX

Defence of the Realm Losses Commission,
51, 52, 58, 400.

Deflation, 293.

De Keysers Hotel, case cited, 51.

Denmark, butter, 256, 304, 383; co-
operation, 340.

Devonport, Lord, 156.

Director-General of National Service, 265.

Director of Army Contracts, 14, 21, 28, 59,
95; of Wool Textile Production, 152 ;
of Meat Supplies, 172, 185, 189, 191;
of Oils and Fats, 215; of Milk Supplies,
247.

District Executive Officers,
purchase, 129, 132-40, 429.

District Supervising Accountants, 210,
445.

Douglas, I. of M., 144.

Dripping, 239-44, 291.

Dublin, 128, 151.

Dundee, 36, 39-48, 57, 65, 70, 79, 81, 379.

for wool

Keonomic General Staff, 192, 278.

Economic theory, 283, 321, 327, 345, 373.

Economies due to control, 359, 381; jute
goods, 39, 49; jute, 80, 83; hides and
leather, 103, 106; Colonial wool, 123 ;
British wool, 133; khaki cloth, 149,
150.

Economist, cited, 117.

Edinburgh, 126, 428.

Egypt, 203, 226, 303.

Hsher, Lord, 14.

Excess Profits duty, 41, 44, 58, 59, 98,
320, 360.

Export, prohibition of, 113, 128, 277, 279 ;
promotion of, 267, 275-9.

Exporters’ Committees, 276.

Extravagance, 28; alleged, 123, 263, 314.

Falkland Islands, 228.

Farmers, psychology of, 127, 142, 287,
333, 339, 343; number growing wool,
132); meetings of, 179; selection com-
mittees, 183, 199, 380.

Fats, 239-44. See Oils and Fats.

Fellmongers, 143.

Flax, 65-78, 304, 307, 368, 374, 379;
Control Board, 76 ; production, 76, 77 ;
gai of dealings in, 62, 69; seed,

, 77; trading accounts, 402.

Flax’ Society Ltd., 77.

Food Control Committees, 174, 180, 18],
184, 186, 193, 234, 237, 252.

Food ‘Controller, 64, 156, 162, 170, 172,
174, 195, 216, 255, 288, 292, 309, 331,
344, 352.

Forster, Mr. H. W., M.P., 152.

Fortescue, Hon. J. W., cited, 7-10.

457

France, wars with, 8-10; self-supporting
in meat, 155; butter, 256, 304.

Franco-Prussian War, 92.

French Government, purchases by, 19, 48,
86, 94, 221-4; exchange of hides, 106.

Gardner, Mr. W. H., 70.

Genoa, 87; Conference, 384.

Germany, 107; invasion of Russia, 72 ;
wool purchases, 113; food control, 287,
290, 331, 342, 379; currency, 374.

Glasgow, 126, 160, 273.

Glycerine, 202, 204, 205, 384.

Government Laboratory, 238.

Grade A milk, 253, 346, 361.

Grading, 344-6; hemp, 87; live stock,
177, 181, 182, 189; milk, 253.

Gresham’s Law, 345, 346.

Hemp, 87-90, 304, 308 ; trading accounts,
420.

Henry, Messrs. A. & 8., 44.

Hides, 102, 104, 106, 107, 159, 284, 341,
342, 364.

Holland, flax, 71, 76, 304 ; margarine, 204,
232-38; cheese, 256, 304.

House of Commons, 59, 134, 142, 395;
see Parliament.

House of Lords, 51, 344.

Humpty Dumpty, 259.

Imperial Tobacco Company, 177, 286.

Import Restrictions Committee, 84, 277.

Import, on State account, 264, 277, 299-
315; restriction of, 267, 272, 276.

Indemnity Act, 52, 55.

India, 303; jute, 35, 47, 48, 80, 82, 85,
308, 311; kips, 107, 108 ; oil-seeds, 203,
PPA PPTL Seay,

India Office, 220, 221, 305.

Inflation, 155, 292-8.

Inter-Allied Co-operation, see Allied Go-
vernments.

Inter- Allied, Leather and Hides Executive.
110; Oil-seeds Executive, 220-4, 280,
351,442 ; Programme Committees, 280.

International Control of Raw Materials,
110, 351, 385, 388.

Treland, flax, 67, 72, 76, 77; wool pur-
chase, 127, 128; live-stock, 159, 198.

Isle of Man, wool purchase, 143.

Italian Government, jute, 86; boots, 103 :
exchange of hides, 106.

Italian hemp, 87.

Italy, meat, 155,

James, William, cited, 2, 4.
Japan, flax seed, 71, 77; wool, 116.
Jurgens, Ltd., 232.

458

Jute, 35-49, 79-86, 300, 303, 305, 308,
311, 317, 348, 374, 378; trading
accounts, 410.

Jute Goods Depot, 44, 45, 379.

Kartel system, 350.
Kips, 107-9, 300.
Kitchener, Lord, 18, 21, 94, 95, 142.

Labour, transfer of, 266, 273, 275.
Labour representation, 280; flax, 77;
‘leather, 109, 424; wool textile, 152-4 ;
meat, 194.

Laisser-faire, 23, 162, 192, 251.

Laws of supply and demand, 23, 31, 36,
40, 43, 372, 373, 376.

League of Nations, 385.

Leather, control of, 101-11 ; costing, 104 ;
certificate scheme, 100; Council, 110,
280; Advisory Committees, 109, 424.

Leather Sellers’ Hall, 102.

Leicester, 151, 273, 427.

Lever Bros., 232.

Licensing, 62, 286, 296 ; jute imports, 85 ;
wool exports, 117; wool buyers, 122 ;
butchers, 163, 165, 173; oils and fats,
206, 218, 242, 243; milk, 250.

Limitation of profits, see Profits.

Linen, goods, 65-7, 70, 76; industry, 65,
70, 76-8.

Liverpool, 38, 39, 52, 160, 218, 373.

Live Stock, control, 180-91 ; Commission-
ers, 171, 180, 183, 186, 191, 380 ; Fund,
177, 181, 189, 195-8, 217, 338, 382;
Advisory Committees, 180, 184.

Live weight system, 158, 165, 168, 174.

Llanelly, 246.

London, 158, 161, 221, 227, 287, 361, 373,
381; meat supplies, 193, 199; oilseeds,
218; fats, 243; milk, 246, 381.

London Wool Brokers Committee, 122, 368.

Malcolm, Mr. George, C.B.E., 82, 308.
Malcolm, Messrs. W. F. & Co., 70.
Manchester, 151, 198, 243, 273, 381.
Manila hemp, see Hemp.

Man-power and production committees,
273-5.

Manufacture, control of, 347-62; see
Costings System.

Margarine, 202, 204, 230-44, 291, 333, 384 ;
composition of, 230, 378; imports,
231-3; clearing-house, 236, 351, 370,
380.

Marginal theory, 212, 321-2, 383.

Master-General of the Ordnance, 15, 24.

Maypole Co., 232-6, 381.

Meat, 155-200, 295, 305, 338, 342; (Sales)
Order, 1917, 156 ; (Restriction of Retail
Sales) Order, 176; Distribution Com-

INDEX

mittees, 173, 185, 187, 380; agents,
186 ; imported, 160, 198-200; impor-
ters’ committee, 187, 188; finance, 196,
197, 338; memorandum on control of,
163-5, 429.

Meat and Live Stock Board, 188.

Metropolitan Water Board, 195.

Milk, 245-53, 291, 344; census of pro-
duction, 245; combine, 246-51, 338-
42, 369; factories, 247; distribution,
247-53, 376-9 ; prices, 288, 289, 332-6 ;
grading, 345-6.

Milner, Lord, 169.

Ministry of Food, 25, 31, 160, 162, 172,
188-258, 286-8, 291, 301, 307, 309, 311,
314, 318, 342, 355, 365-70.

Ministry of Labour, 30.

Ministry of Munitions, 15, 22-5, 61-3, 76,
204-7, 211, 232, 262, 264, 278, 287, 303,
307, 336, 361, 384.

Ministry of Shipping, 84, 89, 119, 220-5,
279, 303.

Monopoly, 376 ; State, 62, 63, 84, 86, 311 ;
world, 385.

Morley, Earl of, 16.

Napoleon, 10, 91.

Nationalization, 388; armament firms,
23, 261; wholesale milk trade, 251.

National Bank of Egypt, 226, 307.

National Debt, 297.

National Factories. 361.

National Health Insurance, 391.

National Service, Act, 171; Department,
270.

Neutral countries, 37; purchase in, 304,

Newcastle Breweries, case cited, 55.

New Zealand, 302, 306, 339; wool pur-
chase, 119, 120, 313; meat, 155, 160,
192, 196, 200; oils and fats, 225, 228;
butter and cheese, 253-7.

Nuts, see Oilseeds,

Office of Works, 305.

Oils and fats, 200-19; Controller, 205 ;
prices, 210-17, 329, 357, 383; costings,
211, 329, 359, 445 ; requisitioning, 216,
440-2; distribution, 217-19, 369;
trading account, 217; import, 228,
229; control of quality, 237-9, 360.

Oilseeds, supply, 220-9, 301; Executive,
222-4, 280, 351, 442; import pro-
gramme, 229; methods of purchase,
224-9, 303, 307, 369.

Olive oil, 228.

Orders: Army Council, March 28, 1916,
68; Publicmeals,1918,176; Seeds, nuts,
and kernels (requisition), 1917, 216, 441;
Oils, oil-cakes, and meals (requisition),
1917, 216; Margarine (maximum) prices,

INDEX

233; Margarine (distribution), 237;
Margarine (registration of dealers), 235 ;
Food control committee (Margarine re-
quisition), 234; Raw beef andraw mutton
fat, 243 ; Home-melt tallow and grease,
243; Wholesale milk dealers (control),
251; Milk (distribution), 252; Butter
(maximum prices), 254 ; Cheese (maxi-
mum prices), 254; Cattle (Sales), 1917,
437; Sheep (Sales), 1918, 438.

Organization, of War Office, 14-17, 21-5 ;
of industry, 22, 32-4, 78, 110, 111, 267,
270-81, 294, 347-62, 395; for war,
259-69 ; of marketing, 372-86, 397 ;
professional, 371, 397.

Oxford, 333, 427.

Panmure, Lord, The Panmure Papers,
cited, 12.

Parliament, 7, 28, 43, 44, 59, 134, 251, 344,”
391.

Peasants, Russian, 75; Continental, 333.

Peat, Sir Harry, K.B.E., 318.

Peat, Sir W. B., & Co., 318.

Penton, Sir Edward, K.B.E., 92.

Petrograd, 75.

Philippine Islands, 87-9, 304.

Pigou, Prof. A. C., cited, 339.

Pigs, failure to control, 331, 342.

Pimlico, 16, 27, 45.

Pitt, 9.

Pooling, of distribution expenses, 177; of
costs and profits, 213-15, 267, 328-9 ;
of trade secrets, 268, 396; of transport,
380; financial, 381-4; of orders, 396.

Port of London Authority, 195.

Port Markets, live stock, 198.

Post Office, 305.

Press, 13, 28, 44, 134, 251, 391.

Prices, control of, 32, 52-63, 70, 100, 103,
282-98, 354, 359, 381-6; market, 38,
53, 56, 57, 86, 96, 102; maximum, 50,
52, 55, 62-4, 105, 206, 211-17, 254,
282-92, 325, 336-8 ; minimum, 336-9 ;
Colonial wool, 122; British wool, 129,
130, 146; meat, 164, 167-71; oils and
fats, 211-17; dripping, 240-3; butter
and cheese, 253-8.

Priority Scheme, wool textiles, 151, 276-9.

Private enterprise, 23, 111.

Profiteering, 19, 26-8, 72, 88, 115, 154,
213, 316, 323, 333; Act, 154, 385.

Profits, rate of, 42, 46, 54, 58, 98, 104;
limitation of, 266, 354-60.

Profit Equalization Scheme, 214, 329,

Propaganda, 391.

Prothero, Mr. R., 141, 169.

Public Accounts Committee, 11, 49, 60, 73,
This, WR},

Publicity, 391.

459

Quality, control of, 344-6, 378; oils and
fats, 237-9 ; dripping, 243, 244; milk,
253, 345, 360.

Quartermaster-General, 15, 24, 27.

Queues, meat, 176; margarine, 234, 235.

Quotas, live stock and meat, 163, 183.

Railway Executive, 196, 237, 382.

Railways, free carriage, 382; wool, 145;
meat, 196; margarine, 237.

Ralli Bros., Messrs., 80.

Rationing, 45, 78, 85, 89, 100, 174, 290,
295, 372; leather, 105; wool, 146; tops,
148; meat, 184, 192-5, 199; margarine,
234-7; milk, 252.

Raw Materials Section, 69, 79, 83, 115,
152.

Recruiting, 273-5.

Requisitioning, 34, 37-42, 50-60, 70, 349,
355; leather, 103, 104; seeds and oils,
216, 217; margarine, 234-6.

Rhondda, Lord, 5, 31, 141, 163, 169-71,
233, 234, 292, 318, 331, 44.9-50.

Robinson Crusoe, 372.

Roubles, 69, 75, 313.

Royal Prerogative, 51, 52, 55, 284.

Russia, 67-71, 75, 76, 288, 304, 312.

Russian flax, see Flax.

Russian, Government, 69, 71, 91, 312;
Revolution, 71.

Sandbags, 24, 36-49.

School of Rural Economy, 333.

Scotland, wool purchase, 126, 132; live
stock and meat, 171, 180, 185; milk,
DISD y.

Self-government, in trade and industry,
111, 150, 280, 370.

Serbia, purchase of boots, 103.

Shoreham Aerodrome, case cited, 51.

Slaughter-houses, 160, 174; Government
authorized, 183, 188-91.

Smithfield, 158, 375; Control Board,
191-5, 369.

Smollett, cited, 8.

Soap, 202, 204, 205, 384.

Socialism, 22, 260, 265, 282, 388.

South Africa, wool, 120; butter, 256.

South African War, 14.

South America, hides, 106 ;
200.

Speculation, 18, 26, 32; meat, 156.

Stabilization, 103, 384-6, 396.

Standard Clothing, see Clothing.

Standardization, hemp, 87; hides, 104;
wool, 121; cloth, 149; cuts of meat,
172; materials, 378, 396.

Standard Oil Co., 385.

State Purchase, of raw materials, 41,
299-315; Russian flax, 69, 72, 307;

meat, 161,

460

Trish flax, 76; jute, 79-86; hemp, 87;
British wool, 118, 125-47; Colonial
wool, 118-24; wholesale milk trade,
250, 251, 449-50.

Statistics, 393 ; see also Census.

Submarine campaign, 72, 79, 148, 151, 170.

Subsidies, 197.

Substitution Scheme, 271.

Suez Canal, 48.

Sugar Commission, 61, 261, 299.

Tallow, 239-44.

Tanners, 101-6.

Tendering, 15, 27-34, 262, 263.

Territorial Force Associations, 18, 19, 93.

‘Trade channels’, 259, 381, 434; leather,
105; Colonial wool, 123; British wool,
136; meat, 163; margarine, 235, 236 ;
wool and hides, 434.

Treasury, 89, 225, 261, 292, 307, 309, 313.

Trevelyan, Sir Charles, 10.

Tunis, 228.

Unemployment, 20, 30, 290, 293.

Unification, of industry, 281, 329, 347,
351; of contracts, 396.

Uniformity of price, 34, 336, 377, 378.

United Dairies, Ltd., 246, 247, 338, 341,
358, 369.

United Kingdom Oilseed Brokers Asso-
ciation, see Associations.

United States, 89, 279, 296, 304, 374;
purchase of leather, 109; wool, 116;
meat, 200; oils and fats, 226-9.

United States Government, 87, 110.

United Tanners Federation, see Associa-
tions.

Valuation, Colonial wool, 119, 121;
British wool, 129-32, 140-1 ; skin wool,
143; agricultural products, 345. See
also Grading.

INDEX

Van den Berghs, Ltd., 232.
Vertical trust, 350.

Wales, wool purchase, 127, 128, 131, 142,
428; milk consumption, 246.

War Munitions Volunteers, 272.

War Office, 8-12, 13, 14, 18-25, 261-5,
275, 278, 285, 300, 305-8.

War Priorities Committee, 76, 279.

War psychology, 1-5.

War Risk Insurance: flax, 72; jute, 86.

Ways and Means Advances, 397.

Wellington, Duke of, 10, 91.

West Africa, oil seeds, 203, 204, 228.

Wheat Commission, 207, 220, 221, 227,
304, 311, 337.

Wholesale Clothiers Federation, see Asso-
ciations.

Wholesale Meat Supply Associations, see
Associations.

Wholesale trade, control of, 363-71.

Willey, Col. F. V., C.M.G., 125.

Winchester, 246.

Winnipeg, 77.

Wintour, Mr. U. F., C.B., C.M.G., 21, 449—
50.

Wood, Prof., 169, 175.

Wool, control of, 112-47, 334, 340, 364-8 ;
British wool purchase, 118, 125-47;
Colonial wool purchase, 118-24; skin
wool, 142; Manx wool, 143; Office at
Bradford, 148; top-making, 148, 149;
British wool areas, 427.

Woolwich, 16, 27, 45, 66.

Workers’ War Emergency Committee, 282.

Worsted Industry, 148, 149, 271-7.

Yonge, Sir George, 10.
Yorkshire, 244, 428.

Zimmern, Mr. A. E., cited, 3.
Zoning system, 267, 381.

OUTLINE OF PLAN
FOR THE

ECONOMIC AND SOCIAL HISTORY OF THE
WORLD WAR

Is
EDITORS AND EDITORIAL BOARDS
(Further arrangements to be announced later.)

GREAT BRITAIN
Sir William Beveridge, K.C.B., Chairman.
Professor H. W. C. Davis, C.B.E.
Mr. Thomas Jones, LL.D.
Mr. J. M. Keynes, C.B.
Mr. F. W. Hirst.
Professor W. R. Scott, D.Phil.
Professor James T. Shotwell, ex officio.

AUSTRIA-HUNGARY

Joint Editorial Board.
Professor J. T. Shotwell, Chairman.
Editors, Austrian Series.
Professor Dr. Friedrich von Wieser) (Chairman).
Dr. Richard Ried].
Dr. Richard Schiiller.
Editor, Hungarian Series.
Dr. Gustav Gratz.
Editor, Public Health Series.
Professor Dr. Clemens von Pirquet.

Tue Bartric CoUNTRIES

Professor Harald Westergaard (Denmark), Chairman.
Professor Eli Heckscher (Sweden).

Mr. N. Rygg (Norway).
Professor James T. Shotwell, ex officio.

(2) '
BELGIUM
Professor H. Pirenne, Editor.

FRANCE
Professor Charles Gide, Chairman.
M. Arthur Fontaine.
Professor Henri Hauser.
Professor Charles Rist.
Professor James T. Shotwell, ew officio.

GERMANY
Dr. Carl Melchior, Chairman.
Professor Dr. Albrecht Mendelssohn Bartholdy.
(Executive Secretary.)
Ex-Chancellor Gustav Bauer.
Dr. Hermann Biicher.
Dr, Carl Duisberg.
Professor Dr. Max Sering.
Professor James T. Shotwell, ex officio.

ITaLy

Professor Luigi Einaudi, Chairman.
Professor Pasquale Jannaccone.
Professor Umberto Ricci.

Professor James T. Shotwell, ea officio.

THE NETHERLANDS
Professor H. B. Greven, Editor.

RUMANIA
Mr. David Mitrany, Editor.

Russia
Editor, First Series.
Sir Paul Vinogradoff, F.B.A.

YucGo-SLavia
Professor Velimar Bajkitch, Editor.

LIST OF MONOGRAPHS

This list includes only those published and in course of preparation,
and may be changed from time to time. The monographs fall into two
main classes, those which may be said to constitute full numbers in the
series, volumes of from 300 to 500 pages ; and partial numbers or special
studies of approximately 100 pages or less, which may ultimately be
incorporated in a full volume along with others dealing with cognate
subjects. Titles have been grouped to indicate the proposed volume
arrangement, but this grouping cannot be regarded as final in the larger and
more complicated series. It is the intention, however, to keep to the total
number of volumes indicated. Separate announcements will be made
concerning volumes dealing with countries outside Europe.

Monographs already published are indicated by an asterisk, partial
numbers by a double asterisk.

BritTisH SERIES

*Bibliographical Survey, by Miss M. E. Bulkley.
*Manual of Archive Administration, by Mr. Hilary Jenkinson.
British Archives in Peace and War, by Dr. Hubert Hall.
War Government of Great Britain and Ireland (with special reference to
its economic aspects), by Professor W. G. S. Adams, C.B.
*War Government of the British Dominions, by Professor A. B. Keith, D.C.L.
*Prices and Wages in the United Kingdom, 1914-1920, by Professor
A. L. Bowley.
British War Budgets and Financial Policy, by Mr. F. W. Hirst and
Mr. J. E. Allen.
Taxation and War-Time Incomes, by Sir Josiah C. Stamp, K.B.E.
Taxation during the War.
War-Time Profits and their Distribution.
The War and Insurance.
A Series of Studies: Life Insurance, by Mr. S. G. Warner; Fire Insur-
ance, by Mr. A. E. Sich and Mr. S. Preston ; Shipping Insurance, by
Sir Norman Hill; Friendly Societies and Health Insurance, by
Sir Alfred Watson; Unemployment Insurance, by Sir William
Beveridge ; with an additional section on the National Savings
Movement, by Sir William Schooling.
Experiments in State Control at the War Office and the Ministry of Food,
by Mr. E. M. H. Lloyd.
British Food Control, by Sir William Beveridge, K.C.B.,and Sir Edward C.K.
Gonner, K.B.E.
*Food Production in War, by Sir Thomas Middleton, K.B.E.

Ce}

Kffect of the War upon British Textile Industries :
The Wool Trade during the War, by Mr. E. F. Hitchcock.
**The Cotton Control Board, by Mr. H. D. Henderson.
*Allied Shipping Control ; an experiment in International Administration,
by Sir Arthur Salter, K.C.B.
General History of British Shipping during the War, by Mr. C. Ernest Fayle.
*The British Coal Industry during the War, by Sir Richard Redmayne, K.C.B.
The British Iron and Steel Industry during the War, by Mr. W. T. Layton,
C.H., C.B.E.
British aanur Unions and the War, by Mr. G. D. H. eae 3
**Trade Unionism and Munitions.
**Labour in the Coal Mining Industry.
*Workshop Organization.
*Labour Supply and Regulation, by Mr. Humbert Wolfe, C.B.E.
Effect of the War upon Public Health :
Public Health Conditions in England during the War, by Dr. A. W. J.
Macfadden, C.B.
Health of the Returned Soldier, by Dr. E. Cunyngham Brown, C.B.E.
Industries of the Clyde Valley during the War, by Professor W. R. Scott
and Mr. J. Cunnison.
Rural Scotland during the War. A series of studies edited and with an
Introduction by Professor W. R. Scott :
Scottish Fisheries, by Mr. D. T. Jones; Scottish Agriculture, by
Mr. H. M. Conacher; The Scottish Agricultural Labourer, by
Mr. Duncan; Scottish Land Settlement, by Professor W. R. Scott ;
Appendix on Jute, by Dr. J. P. Day.
Wales in the World War, by Thomas Jones, LL.D.
Manchester : A Study of Local War-time Conditions, by Professor H. W. C.
Davis.
Guides to the Study of War-Time Economics :
Dictionary of Official War-Time Organizations, by Dr. N. B. Dearle.
Economic Chronicle of the War, by Dr. N. B. Dearle.
Cost of War to Great Britain (to be arranged).

AUSTRIAN AND HUNGARIAN SERIES
Austria-Hungary :
Bibliography of Austrian Economic Literature during the War, by
Professor Dr. Othmar Spann.
Austro-Hungarian Finance during the War, by Dr. Alexander Popovics.
Military Economic History, a series of studies directed by Professor
Dr. von Wieser, Generals Krauss and Hoen, and Colonel Glaise-
Horstenau.
Conscription, &c., by Colonel Klose; Munitions and Supply, by Colonel
Pflug ; enmtporeron under Military ae by Colonel Ratzen-
hofer; Others to follow.

(5 )

Economic Use of Occupied Territories: Serbia, Montenegro, Albania, by
General Kerchnawe.

* Mittel-Europa ’: the Preparation of a New Joint Economy, by Dr. Gratz
and Dr. Schiiller.

Exhaustion and Disorganization of the Habsburg Monarchy, by Professor
Dr. Friedrich von Wieser, with a section on the Disruption of the
Austro-Hungarian Economic Union, by Dr. Richard Schiiller.

The Cost of the War to Austria and Hungary, by Dr. Hornik.

Empire of Austria:

War Government in Austria, by Professor Dr. Joseph Redlich.

The Effect of the War upon Morals and Religion, by Chancellor Seipel.

The War and Crime in Austria, by Professor Franz Exner.

Industrial Control in Austria during the War, a series of studies directed
by Dr. Richard Riedl.

Food Control and Agriculture in Austria during the War, a series of studies
directed by Dr. H. Léwenfeld-Russ.

Labour in Austria during the War, a series of studies directed by
Mr. Ferdinand Hanusch.

Austrian Railways during the War (Civil Control), by Ing. Bruno Ritter
von Enderes.

Coal Supply in Austria during the War, by Ing. Emil Homann-Herimberg.

Kingdom of Hungary :

Economie War History of Hungary: A General Survey, by Dr. Gustav
Gratz.

Effects of the War upon the Hungarian Government and People, by
Count Albert Apponyi.

Hungarian Industry during the War, by Baron Joseph Szterényi.

History of Hungarian Commerce during the War, by Dr. Alexander
Matlckovits.

History of Hungarian Finance during the War, by Dr. Johann von
Teleszky.

Hungarian Agriculture during the War, by Dr. Emil von Mutschenbacher,
and Food Control in Hungary during the War, by Professor Johann
Bud.

Social Conditions in Hungary during the War, by Dr. Desider Pap.

Public Health and the War in Austria-Hungary :

General Survey of Public Health in Austria-Hungary, by Professor
Dr. Clemens von Pirquet.

The Effect of the War upon Public Health in Austria and Hungary.
A series of studies by Drs. Helly, Kirchenberger, Steiner, Raschofsky,
Kassowitz, Breitner, von Bokay, Schacherl, Hockauf, Finger, Kyrle,
Elias, Economo, Miiller-Deham, Nobel, Wagner, Edelmann, and Mayer-
hofer, edited with Introduction by Professor Dr. Clemens von Pirquet.

(6)

BELGIAN SERIES

Belgium and the World War, by Professor H. Pirenne.

Deportation of Belgian Workmen and the Forced Labour of the Civilian
Population during the German Occupation of Belgium, by M. Fernand
Passelecq.

Food Supply of Belgium during the German Occupation, by Dr. Albert
Henry.

German Legislation with Reference to the Occupation of Belgium, by
Drs. J. Pirenne and M. Vauthier.

- Unemployment in Belgium during the German Occupation, by Professor
Ernest Mahaim.

Destruction of Belgian Industry by the Germans, by Count Charles de
Kerchove.

Economic Policies of the Belgian Government during the War, by Professor
F. J. van Langenhove.

CzECcHO-SLOVAK SERIES

*Financial Policy of Czecho-Slovakia during the first year of its History,
by Dr. A. Rain.
(A further volume to be arranged.)

Dutcu SERIES

**War Finances in the Netherlands up to 1918, by Dr. M. J. van der Flier.
Economic and Social Effects of the War upon the Netherlands.

A series of studies: Effect of the War upon Supplies, by F. E. Post-
huma; The Dutch Manufacturing Industry, by C. J. P. Zaalberg ;
Dutch Commerce and Navigation, by E. P. de Monchy; Prices,
Wages, &c., by H. W. Methorst ; Banking and Currency, by Viseering
and Holstyn; The Dutch Colonies, by J. H. Carpentier Alting ;
Netherlands War Finances, 1918-22, by H. W. C. Bordewyk.

FRENCH SERIES

Bibliographical Guide to the Literature concerning France for the
Economic History of the War, by Dr. Camille Bloch.
Effects of the War upon Government :
Kffect of the War upon the Civil Government of France, by Professor
Pierre Renouvin.
A Guide to Official War-Time Organizations, by M. Armand Boutillier
du Retail.
Problem of Regionalism, by Professor Henri Hauser.
The Organisation of the Republic for Peace, by M. Henri Chardon.

.

(7)

Studies in War-Time Statistics :

Effect of the War upon Population and upon Incomes, by M. Michel
Huber.
Prices and Wages during the War, by M. Lucien March.

Supply and Control of Food in War-Time :

Rationing and Food Control, by MM. Adolphe Pichon and P. Pinot.
Agriculture during the War, by M. Michel Augé-Laribé.

The History of French Industry during the War, by M. Arthur
Fontaine.

Effects of the War upon Textile Industries, by Professor Albert Aftalion.

Effects of the War upon Metallurgy and Engineering, by M. Robert Pinot,
and Effects of the War upon Chemical Industries, by M. Eugéne
Mauclére.

Effects of the War upon Fuel and Motive Power :

Coal Industry and Mineral Fuels, by M. Henri de Peyerimhoff.
Hydro-electric Power, by Professor Raoul Blanchard.

Forestry and the Timber Industry during the War, by General Georges-
Chevalier; and War-Time Aeronautic Industries, by Colonel
Paul Dhe.

Organization of War Industries, by M. Albert Thomas.

Labour Conditions during the War, by MM. William Oualid and M. C.
Picquenard.

Studies in War-Time Labour Problems (2 volumes) :

Unemployment during the War, by M. A. Créhange.
Syndicalism during the War, by M. Roger Picard.

Foreign and Colonial Workmen in France, by M. B. Nogaro.
Women in Industry under War Conditions, by M. Marcel Frois.

Effects of the War in the Occupied Territories :

The Organization of Labour in the Invaded Territories, by M. Pierre
Boulin.

Food Supply in the Invaded Territory, by MM. Paul Collinet and
Paul Stahl.

Damage Inflicted by the War, by M. Edmond Michel.

Refugees and Prisoners of War :

The Refugees and the Interned Civilians, by Professor Pierre Caron.
Prisoners of War, by M. Georges Cahen-Salvador.
Effects of the War upon Transportation :
French Railroads during the War, by M. Marcel Peschaud.
Internal Waterways, Freight Traffic, by M. Georges Pocard de Kerviler.

Effects of the War upon French Shipping :

Merchant Shipping during the War, by M. Henri Cangardel.

French Ports during the War, by M. Georges Hersent.
Effects of the War upon French Commerce, by Professor Charles Rist.
The Blockade, by MM. Denys-Cochin and Jean Gott.

(8 )

French Commercial Policy during War, (2 vols.) by M. Etienne Clémentel.
Effects of the War upon French Finances :
War-Time Finances, by M. Henri Truchy.
War-Time Banking, by M. Albert Aupetit.
Studies in Social History :
Co-operative Societies and the Struggle against High Prices, by
Professor Charles Gide.

Effects of the War upon the Problem of Housing, by M. Henri Sellier.
Effects of the War upon Public Health :

Public Health and Hygiene, by Dr. Léon Bernard.

The Wounded Soldiers, by MM. Cassin and Ville-Chabrolle.
Economic History of French Cities during the War (2 volumes):

Lyons, by M. Edouard Herriot.

Rouen, by M. J. Levainville.

Bordeaux, by M. Paul Courteault.

Bourges, by M. C. J. Gignoux.

Paris, by M. Henri Sellier.

Tours, by Professor M. L’héritier.

Effects of the War upon Colonies and Possessions :

The Colonies in War-Time, by M. Arthur Girault.

Effects of the War upon Northern Africa, by M. Augustin Bernard.
iiffects of the War upon Alsace-Lorraine, by M. Georges Delahache.
The Cost of the War to France:

War Costs: Direct Expenses, by Professor Gaston Jeze.

The Costs of the War to France, by Professor Charles Gide.

GERMAN SERIES

Bibliographical Survey of German Literature for the Economic History
of the War, by Professor Dr. A. Mendelssohn Bartholdy and Dr. E.
Rosenbaum ; with a supplementary section on The Imperial German
Archives, by Dr. Miisebeck.

Effect of the War upon the Government and Constitution of Germany :

(1) The War Government of Germany, by Professor A. Mendelssohn
Bartholdy.

(2) The Political Administration of Occupied Territories, by Freiherr
von Gayl, Dr. W. von Kries, and Dr. L. F. von Kohler.

Effect of the War upon Morals and Religion :

(1) Effect of the War upon Morals, by Professor Dr. Otto Baumgarten.
(2) Effect of the War upon Religion, by Professor Dr. Erich Foerster
and Professor Dr. Arnold Rademacher.
(8) Effect of the War upon the Young, by Dr. Wilhelm Flitner.
The War and Crime, by Professor Moritz Liepmann.

(9)

The Effect of the War upon Population, Income, and Standard of Living

in Germany :

(1) The Effect of the War upon Population : a study in vital statistics,

by Professor Rudolf Meerwarth.

(2) The Effect of the War upon Incomes, by Professor Dr. Adolf

Gunther.

General Effects of the War upon Production, by Professor Max Sering.

The War and Government Control :

(1) State Control and Decontrol, by Professor Dr. H. Goppert.

(2) Supply of Raw Materials under Government Control, by Dr. A.

Koeth.

(3) Economic Co-operation with the Allies of Germany and the Govern-

ment Organization of Supplies, by Dr. W. Frisch.

Economic Exploitation of Occupied Territories :

Belgium and Northern France, by Dr. Jahn; Rumania and the
Ukraine, by Dr. Mann; Poland and the Baltic, by Dr. W. von Kries
and Freiherr von Gayl.

The Effect of the War upon German Commerce, by Professor Dr. W.

Wiedenfeld.

The Effect of the War upon Shipping and Railways :

(1) War and German Shipping, by Dr. E. Rosenbaum.

(2) War and German Railways (to be arranged).

The Influence of the War upon German Industry, by Geheimrat Hermann

Bucher.

The War and German Labour Unions, by Paul Umbreit, Adam Steger-

wald, Anton Erkelenz, and Ex-Chancellor Gustav Bauer.

The Social History of the Labouring Classes during and after the War :
(1) The War and the German Working Man, by Ex-Minister David.
(2) The War and Wages, by Professor Dr. Waldemar Zimmermann.

Food Supply and Agriculture :

(1) The War and the Agricultural Population, by Professor Max Sering.

(2) Food Supply during the War, by Professor A. Skalweit.

(83) Food Statistics of the War Period, by Professor Dr. Ernst Wage-

mann.

Effect of the War upon German Finance :

(i) The Effect of the War upon Currency and Banking, by Professor

Dr. Hermann Schumacher.
(2) German Public Finance during the War, by Professor Dr. Walter
Lotz.

ITALIAN SERIES
Bibliographical Survey of the Economic and Social Problems of the War,
by Professor Vincenzo Porri, with an introduction on the collection and
use of the documents of the War, by Comm. Eugenio Casanova.

( 10 )

The Economic Legislation of the War, by Professor Alberto De’ Stefani.

Agricultural Production in Italy, 1914-19, by Professor Umberto Ricci.

The Agricultural Classes in Italy during the War, by Professor Arrigo
Serpieri.

Food Supply and Rationing, by Professor Riccardo Bachi; and Food
Supply of the Italian Army, by Professor Gaetano Zingali.

War-Time Finances, by Professor Luigi Einaudi.

Cost of the War to Italy, by Professor Luigi Einaudi.

Currency Inflation in Italy and its Effects on Prices, Incomes, and Foreign
Exchanges, by Professor Pasquale Jannaccone.

Vital Statistics and Public Health in Italy during and after the War, by
Professor Giorgio Mortara.

The Italian People during and after the War: A Social Survey, by
Professor Gioacchino Volpe.

Social and Economic Life in Piedmont as affected by the War, by
Professor Giuseppe Prato.

PoRTUGUESE SERIES

Economic and Social History of Portugal as affected by the War, by
Professor George Young.

RUMANIAN SERIES

The Rural Revolution in Rumania and South-eastern Europe, by
D. Mitrany.

The Effect of the Enemy Occupation of Rumania, by Dr. G. Antipa.

The Effect of the War upon Public Health in Rumania, by Professor
J. Cantacuzino,.

First Russian SERIES
(To the Bolshevik Revolution)

Effects of the War upon Government and National Finances in Russia :
Effects of the War upon the Central Government, by Professor Paul P.
Gronsky.
State Finances during the War, by Mr. Alexander M. Michelson.
Russian State Credit during the War, by Mr. Paul N. Apostol.
Effects of the War upon Currency and Banking in Russia :
Currency in Russia during the War, by Professor Michael V. Bernadsky.
~ The Zemstvos in Peace and War, by Prince George E. Lvoff.
German Capital in Russia and the War, by Mr. Basil B. Eliashevitch.
Municipalities and Zemstvos during the War :
Effect of the War upon Russian Municipalities; and the All-Russian
Union of Towns, by Mr. N. I. Astroff. 4

(1)

The Zemstvos, by Prince Viadimir A. Obolensky; The All-Russian
Union of the Zemstvos and the Zemgor, by Mr. Sergius P. Turin. |
The War and the Psychology of the Zemstvos Workers, by Mr. Isaak V.

Shklovsky.

Effects of the War upon the Co-operative Movement in Russia :

Effect of the War upon Agricultural Co-operation and Co-operative
Credit, by Professor A. N. Anziferoff.

Co-operatives and Consumers in Russia during the War, by Professor
V. T. Totomianz.

The Russian Army in the World War: a study in social history, by
General Nicholas N. Golovine.

Rural Economy in Russia and the War, by Professor A. N. Anziferoff,
Professor Alexander Bilimovitch, and Mr. M. O. Batcheff.

Effect of the War upon Land Holding and Settlement in Russia, by
Professor Alexander D. Bilimoyvitch and Professor V. A. Kossinsky.

Problem of Food Supply in Russia during the War, by Professor Peter B.
Struve. |

State Control of Industry in Russia during the War, by Mr. Simon O.
Zagorsky.

Effects of the War upon Russian Industries :

Coal Mining, by Mr. Boris N. Sokoloff.

Petroleum, by Mr. Alexander M. Michelson.

Metal Manufacturing Industries, by General Hermonius.
Chemical industry, by Mr. Mark A. Landau.

Effects of the War upon Labour and Industrial Conditions :
Flax and Wool Industry, by Mr. Sergius N. Tretiakoff.
Textile (Cotton) Industry, by Mr. Theodorovitch G. Karpoff.
Wages in War-Time, by Miss Anna G. Eisenstadt.
Workmen’s Family Budgets, by Mr. Stanislas S. Kohn.
Changes in the Conditions and Composition of the Working Classes, by

Mr. W. T. Braithwaite.

Effects of the War upon Trade and Commerce :

Internal Russian Trade during the War, by Mr. Paul A. Bouryshkine.
Russia in the Economic War, by Professor Boris E. Nolde.

Effects of the War upon Transportation in Russia, by Mr. Michael B.
Braikevitch ; and the Social History of the Ukraine during the War,
by Mr. Nicholas M. Mogilamsky.

Effects of the War upon Education and Public Health in Russia, by
Professor L. A. Taracievitch.

Elementary and Secondary Schools during the War, by Professor D. M.
Odinez.

(12 )

Universities and Academic Institutions during the War, by Professor
P. J. Novgorodzoff.

Vital Statistics of Russia during the War, by Professor A. A. Tschuproff.

Russia in the World War: a historical synthesis, by Sir Paul Vinogradoff.

SCANDINAVIAN SERIES

The Effects of the War upon Sweden; a series of studies :

The Life and Work of the Swedish People (General Introduction), by
Professor Eli F. Heckscher ; Swedish Agriculture and Food Supply,
by Mr. Carl Mannerfelt ; Swedish Industry, by Mr. Olaf Edstrom ;
The Working Classes, by Mr. Otto Jarte.

The Effects of the War upon Swedish Finance and Commerce : Currency
and Finance, by Professor Eli F. Heckscher ; Swedish Commerce, by
Mr. Kurt Bergendal.

Norway and the World War, by Dr. Wilhelm Keilhau.
The Economic Effects of the War upon Denmark, by Dr. Einar Cohn, with
a section on Iceland by Mr. Thorstein Thorsteinsson.

YuGo-SLAvV SERIES

Economic Situation of Serbia at the Outbreak and during the First Year
of the War, by Professor Velimir Bajkitch.

Economic and Social Effects of the War upon Yugo-Slavia (volume to be
arranged).

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